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. 170300058
TYPE: ADDITIONAL WELLS
ORDER NO. 112-269 |
REPORT OF THE COMMISSION
The Commission heard this matter on March 20, 2017, at the Larimer County Conference Center at The Ranch, First National Bank Building, 5280 Arena Circle, Loveland, Colorado upon application for an order to approve up to three additional wells in the Tiffany Unit, for production of oil, gas and associated hydrocarbons from the Fruitland Coal Formation.
FINDINGS
The Commission finds as follows:
1. BP America Production Company (Operator No. 10000) (“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 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 March 2, 2015, the Commission entered Order No. 112-249, which amended the Tiffany Unit to provide for primary recovery operations and allowed up to an additional four wells in the Tiffany Unit with the productive interval of each wellbore to 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.
7. On January 27, 2016, the Commission entered Order No. 112-261 allowed up to an additional 18 wells in the Tiffany Unit, with the productive interval of each wellbore to be located 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.
8. December 9, 2016, BP, by its attorneys, filed with the Commission pursuant to §34-60-116, C.R.S., a verified application (“Application”) for an order to approve up to three additional wells in the Tiffany Unit for the below-described lands (“Application Lands”) and 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 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
9. Applicant also requested that all proposed wells be located on up to one new well pad within the unit, or the equivalent, without exception by the Director.
10. Pursuant to §34-60-118(6), C.R.S., the relief requested in the Application affects only the rights and interests 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 as amended by Order Nos. 112-249 and 112-261.
11. On February 28, 2017, BP, by its attorneys, 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.
12. Land testimony and exhibits submitted in support of the Application by Tanya Curcuruto, Land Negotiator, L-48 Onshore, for BP, showed that the Applicant holds an undivided 98.120362% leasehold interest in the Application Lands. Ms. Curcuruto also confirmed that production allocation from the Tiffany Unit has not changed since entry of Order No. 112-122 and restated by Order No. 112-249, and will be allocated to separately owned tracts in the Tiffany Unit in accordance with the 1996 Tiffany (Fruitland) Unit Agreement and its January 1, 2015 Amendment, and the 1996 Unit Operating Agreement and its January 1, 2015 Amendment, both of which were approved by Order No. 112-249.
13. The land testimony further showed that the following interested parties whose addresses are unknown were served with a Summons by Publication pursuant to Commission Rule 507.a, Colorado Rule of Civil Procedure 4(g)(2), and §34-60-108(4), C.R.S.: Edmund B. Davenport; Elsie Rowse Moore Estate; The Estate of Jack L. Rowse; Sherman John Riggin; Sharon Louise Whitney; and All unknown persons who may claim any interest in the subject matter of this action. All other interested parties were notified of the Application in accordance with §34-60-108(4), C.R.S.
14. BP requested that in addition to considering the written testimony and exhibits submitted with the February 28, 2017 written request to approve the Application, that pursuant to Rule 519.c.(4) the Commission take administrative notice of the exhibits from the Rule 511 testimony associated with Docket No. 150100040, as approved by Order No. 112-249. The Commission has done so.
15. Geologic testimony and exhibits submitted in support of the Application by Jennifer A. Wadsworth, Geologist for BP, showed that the Fruitland Coal Formation underlies the Application Lands. Ms. Wadsworth testified that three Fruitland Coal seams are tracked across the area and are expected to be encountered in the proposed drilling program. Those are the Lemon Coal seam, Lower Lemon Coal seam and the Ignacio Coal seam. The Lemon-L and Ignacio seams each range from about 15-20 feet thick and are the primary targets. They are very continuous and locally merge into a single seam. The Lemon seam is thinner and less continuous and is best developed in the northwest part of the Tiffany Unit. Geologic testimony and structures maps submitted with that testimony showed that there is significant structural relief in the Tiffany area and that well pads were designed to take advantage of this structural relief.
16. Engineering testimony and exhibits submitted in support of the Application by Robert L. Moore, Reservoir Engineer for BP, referenced the 2017 Plan of Operation for the Tiffany Unit, which summarized the development history and production history of the Tiffany Unit. Mr. Moore’s testimony and exhibits also demonstrated that the requested relief will optimize resource development potential in the Tiffany Unit, support continued infill development in the Tiffany Unit, and showed that additional wells are necessary to increase the ultimate recovery of hydrocarbons in the Tiffany Unit and that the value of the estimated additional recovery of hydrocarbons exceeds the estimated cost incident to conducting such operations.
17. 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 the Tiffany Unit. 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.
18. 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.
19. On February 16, 2017, the Southern Ute Indian Tribe submitted a concurrence letter in support of the Application.
20. On February 27, 2017, the Bureau of Land Management also submitted a concurrence letter in support of the Application.
21. Applicant and La Plata County, Colorado, jointly requested that a Stipulation, made and agreed to by the parties, effective December 15, 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.
22. Applicant agreed to be bound by oral order of the Commission.
23. 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 approve up to 18 additional wells in the Tiffany Unit, for production of oil, gas and associated hydrocarbons from the Fruitland Coal Formation.
ORDER
IT IS HEREBY ORDERED
1. A total of up to three additional wells, are hereby approved, in the Tiffany Unit, for the below-described lands, 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 shall be located to 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 of oil, gas and associated hydrocarbons from the Fruitland Coal Formation.
3. The proposed wells shall be located on up to one new well pad within the unit, or the equivalent, unless the Director grants an exception.
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 were attached to and made a part of Order No. 112-249 of this Commission on file in the office of the Commission, are approved as being in the public interest.
5. Compliance with the Stipulation between BP and La Plata County, Colorado, effective December 15, 2015, is made a condition of approval of this Order.
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 27th day of March, 2017, as of March 20, 2017.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By ______
Peter Gowen, Acting Secretary