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 FOR THE FRUITLAND COAL SEAMS FORMATION, IGNACIO-BLANCO FIELD, ARCHULETA COUNTY, COLORADO |
) ) ) ) ) ) ) ) |
CAUSE NO. 112
DOCKET NO. 170500202
TYPE: EXCEPTION LOCATION
ORDER NO. 112-272 |
REPORT OF THE COMMISSION
The Commission heard this matter on June 12, 2017, at the Rio Blanco County Courthouse, 555 Main Street, Meeker, CO 81641 upon application for an order to modify the setbacks within two approximate 640-acre drilling and spacing units established by Order No. 112-210 for Sections 4 and 9, Township 32 North, Range 5 West, N.M.P.M., such that the productive interval of any well within each unit shall be no less than 660 feet from the unit boundaries, and the treated interval of the wells shall be no less than 150 feet from the treated interval of another well producing from the same formation, for production of oil, gas and associated hydrocarbons from the Fruitland Coal Seams Formation.
FINDINGS
The Commission finds as follows:
1. Red Willow Production Company (Operator No. 81295) (“RWPC” or “Applicant”), which is a division of the Southern Ute Indian Tribe, 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 Colorado Oil and Gas Conservation Commission (“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, subject to the Finding Number 4, immediately below.
4. Insofar as the Application concerns lands within the jurisdiction of the Southern Ute Indian Tribe, it 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 the Commission and the separate Memorandum of Understanding dated August 22, 1991 between the Bureau of Indian Affairs, the BLM and the Southern Ute Indian Tribe (collectively, the “MOU’s”). In portions of the Application Lands, the Southern Ute Indian Tribe owns surface interests, mineral interests and leasehold interests underlying such lands.
5. On or about June 17, 1988, the Commission entered Order No. 112-60 which, among other things, established 320-acre drilling and spacing units for the production of gas from the Fruitland Coal Seams Formation in Sections 4 and 9, Township 32 North, Range 5 West, N.M.P.M.
6. On or about August 15, 1988, the Commission entered Order No. 112-61 which, among other things, amended Order No. 112-60 to reestablish 320-acre drilling and spacing units for the production of gas from the Fruitland Coal Seams Formation in the Sections 4 and 9, Township 32 North, Range 5 West, N.M.P.M., with the units consisting of the N/2 and S/2 or the E/2 and W/2 of a full section with the permitted well located, when north of the north line of Township 32 North, in the NW/4 and SE/4 of the section, and when south of the north line of Township 32 North, in the NE/4 and SW/4 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.
7. On or about December 17, 1990, the Commission entered Order No. 112-85 which, among other things, amended Order No. 112-61 to include additional rules for safety purposes. Sections 4 and 9, Township 32 North, Range 5 West, N.M.P.M., are subject to this order for the production of oil, gas and associated hydrocarbons from the Fruitland Coal Seams Formation.
8. On or about May 8, 2008, the Commission entered Order No. 112-210 which, among other things, vacated the 320 acre-drilling and spacing units established by Order Nos. 112-60 and 112-61, and established 640-acre drilling and spacing units for certain lands, including Sections 4 and 9, Township 32 North, Range 5 West, N.M.P.M., with authority to drill up to two wells no closer than 990 feet from the unit boundary, for the production of gas and associated hydrocarbons from the Fruitland Coal Seams Formation.
9. On March 1, 2017, RWPC, by its attorneys, filed with the Commission a verified application (“Application”) for an order modifying the setbacks for two 640-acre drilling and spacing units established by Order No. 112-210 for the below described lands (“Application Lands”), such that the productive interval of any well within each unit shall be no less than 660 feet from the unit boundaries, and the treated interval of the wells shall be no less than 150 feet from the treated interval of another well producing from the same formation, for production of the oil, gas, and associated hydrocarbons from the Fruitland Coal Seams Formation.
Township 32 North, Range 5 West, N.M.P.M.
|
Section 4: |
All |
Drilling and Spacing Unit (“DSU”) No. 1
Township 32 North, Range 5 West, N.M.P.M.
|
Section 9: |
All |
DSU No. 2
10. On May 22, 2017, RWPC, 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.
11. Testimony and exhibits submitted in support of the Application by Mary Scott, Landman for RWPC, showed that RWPC owns a leasehold interest in the Application Lands.
12. Geology testimony and exhibits submitted in support of the Application by Tom Ann Casey, Senior Geologist for RWPC, showed that the thickness of the Fruitland Coal Formation underlying the Application Lands ranges from approximately 16 to 41 feet thick. Further testimony showed that the Fruitland Coal Formation is a common source of supply.
13. Engineering testimony and exhibits submitted in support of the Application by Paul Marusak, Reservoir Engineer for RWPC, showed that drilling and completing horizontal wells within the Fruitland Coal Formation underlying the Application Lands is an efficient and economic method of developing the resource. Testimony concluded reducing setbacks will foster responsible development of oil and gas, protect the public and private interests against waste in the production of oil and gas, and safeguard the correlative rights of owners and producers in a common source of oil and gas such that each owner or producer may obtain a just and equitable share of production therefrom.
14. The treated intervals of the proposed horizontal wells should be no closer than 660 feet from the unit boundaries of the drilling and spacing units and no closer than 150 feet from the treated interval of another well producing from the same formation, without exception being granted by the Director.
15. The online records maintained by the Commission indicate that there are no vertical or directional wells currently producing in the Application Lands. Additionally, the online records maintained by the Commission indicate that there are five horizontal wells currently producing in the Application Lands: the North Carracas 32-5-9C-4 Well (API No. 05-007-06295), the North Carracas 32-5-10C-1 Well (API No. 05-007-06297), the North Carracas 32-5-3C-1 Well (API No. 05-007-06298), the North Caracas 32-5-4C-1 Well (API No. 05-007-06300), and the North Carracas 32-5-10C-2 Well (API No. 05-007-06301). Each of these wells was permitted pursuant to the drilling and spacing unit established by Order No. 112-210 and proceeds from the sale of oil and gas from such wells should continue to be paid according to their current allocation.
16. 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 hydrocarbons, and will not violate correlative rights.
17. Applicant agrees to be bound by oral order of the Commission in accordance with the MOU’s.
18. 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 modifying the setbacks for two 640-acre drilling and spacing units established by Order No. 112-210 for Sections 4 and 9, Township 32 North, Range 5 West, N.M.P.M., such that the productive interval of any well within each unit shall be no less than 660 feet from the unit boundaries, and the treated interval of the wells shall be no less than 150 feet from the treated interval of another well producing from the same formation, for production of the oil, gas, and associated hydrocarbons from the Fruitland Coal Seams Formation.
ORDER
IT IS HEREBY ORDERED:
Township 32 North, Range 5 West, N.M.P.M.
|
Section 4: |
All |
Drilling and Spacing Unit (“DSU”) No. 1
Township 32 North, Range 5 West, N.M.P.M.
|
Section 9: |
All |
DSU No. 2
2. Any horizontal wells to be drilled under this order for production from the Fruitland Coal Seams Formation will be drilled from the surface of the drilling units, or on adjacent lands with consent of the landowner, from no more than four surface locations, unless the Director grants an exception.
3. Any wellbore of any horizontal wells to be drilled under this Order may enter the Fruitland Coal Seams Formation anywhere within each unit, or on adjacent lands, unless the Director grants an exception.
4. For any permitted wells to be drilled under this order for production from the Fruitland Coal Seams Formation, the treated intervals of the wells shall be not less than 150 feet from the treated interval of another well producing from the same formation, unless the Director grants an exception.
5. For any permitted wells to be drilled under this order for production from the Fruitland Coal Seams Formation, the productive interval of any permitted well shall be located no closer than 660 feet from each unit boundary, unless the Director grants an exception.
6. The North Carracas 32-5-9C-4 Well (API No. 05-007-06295), the North Carracas 32-5-10C-1 Well (API No. 05-007-06297), the North Carracas 32-5-3C-1 Well (API No. 05-007-06298), the North Caracas 32-5-4C-1 Well (API No. 05-007-06300), and the North Carracas 32-5-10C-2 Well (API No. 05-007-06301) shall continue paying proceeds from the sale of oil and gas from such wells according to their current allocation.
IT IS FURTHER ORDERED that the wells drilled in the above-described lands shall conform to all terms, conditions and provisions of prior Commission Orders in Cause No. 112 in accordance with the MOU’s.
IT IS FURTHER ORDERED that wells drilled in the above-described lands shall comply with certain provisions of the Memorandum of Understanding between Red Willow and Energen and La Plata County (“County MOU”). For convenience and ease of reference, the relevant conditions of the County MOU are set forth below. Conflicts between the conditions of the County MOU set forth herein and the terms, conditions and provisions of Commission Orders in Cause No. 112 shall be resolved in favor of the County MOU.
IT IS FURTHER ORDERED that the following provisions of the County MOU shall be applied to additional wells where the surface location is proposed to be sited on lands subject to Commission jurisdiction, in addition to any requirements of applicable existing Commission Rules and Regulations or orders:
6. Storm Water Management and Spill Prevention Containment and Control Even if not required to do so by any applicable regulation or law, Red Willow agrees to utilize best management practices for all pad expansions and new pads and for road and pipeline development or improvements.
7. Water Well Monitoring If a conventional gas well exists within one quarter (¼) mile of the bottom hole location of a proposed Infill Well, then the two (2) closest water wells within a one-half (½) mile radius of a conventional gas well shall be sampled by Red Willow as water quality testing wells. If possible, the water wells selected shall be on opposite sides of the existing conventional gas well not exceeding one-half (½) mile radius. "Infill Well" means wells drilled pursuant to this order. "Conventional gas well" means a well producing from a non-coalbed methane formation found in the San Juan Basin, such as the Mesaverde or Dakota Sandstone Formation.
8. If water wells on opposite sides of the conventional gas well cannot be identified, then the two (2) closest wells within one-half (½) mile radius shall be sampled. If two (2) or more conventional gas wells are located within one quarter (¼) mile of the bottom hole location of the proposed Infill Well, then the conventional gas well closest to a proposed Infill Well shall be used for selecting water wells for sampling.
9. If no conventional gas wells are located within one quarter (¼) mile radius of the bottom hole location of the proposed Infill Well, then the selected water wells shall be within one quarter (¼) mile of the bottom hole location of the proposed Infill Well. In areas where two (2) or more water wells exist within one quarter (¼) mile of the bottom hole location of the proposed Infill Well, then the two (2) closest water wells shall be sampled by Red Willow. Ideally, if possible, the water wells selected shall be on opposite sides of the bottom hole location of the proposed Infill Well. If water wells on opposite sides of the bottom hole location of the proposed Infill Well cannot be identified, then Red Willow shall sample the two (2) closest wells within one-quarter (¼) mile radius. If two (2) water wells do not exist within one-quarter (¼) mile radius, then the two closest water wells within a one-half (½) mile radius shall be selected.
10. If no water well is located within a one-quarter (¼) mile radius area or if access is denied, two water wells within one-half (½) mile of the bottom hole location of the Infill Well shall be selected. If there are no water quality testing wells meeting the foregoing criteria, then sampling shall not be required. If the BLM or the Commission have already acquired data on a water well within one quarter (¼) mile of the conventional gas well, but it is not the closest water well, it shall be given preference in selecting a water quality testing well. The "initial baseline testing" described in this paragraph shall include all major cations and anions, total dissolved solids ("TDS"), iron and manganese, nutrients (nitrates and nitrites), selenium, dissolved methane, pH, presence of bacteria and specific conductance and field hydrogen sulfide.
11. If free gas or a methane concentration level greater than 2 milligrams/liter ("mg/L") is detected in a water quality testing well, compositional analysis and isotopic analyses of the carbon and hydrogen of the methane shall be performed to determine gas type (thermogenic, biogenic or an intermediate mix of both). If the testing results reveal biogenic gas, no further isotopic testing shall be done. If the carbon isotope test results in a thermogenic or intermediate mix signature, annual testing shall be performed thereafter and an action plan shall be drafted by Red Willow to determine the source of the gas. If the methane concentration level increases by more than 5 mg/L between sampling periods, or increases to more than 10 mg/L, an action plan shall be drafted to determine the source of the gas.
12. The initial baseline testing shall occur prior to the drilling of the proposed Infill Well. Within one (1) year after completion of the proposed Infill Well, a "post completion" test shall be performed for the same parameters above and repeated three (3) and six (6) years thereafter. If no significant changes from the baseline have been identified after the third test (the six year test), no further testing shall be required. The testing schedule shall restart after the drilling of a new Infill Well on an existing Well Pad if the wells to be tested include those tested for the 160-acre infill program. Additional "post completion" test(s) may be required if changes in water quality are identified during follow-up testing. The Director of the Commission may require further water well sampling, which may include water quantity monitoring, at any time in response to complaints from water well owners.
13. Within three (3) months of collecting the samples used for the test, copies of all test results described above shall be provided to the Commission and the County and the landowner where the water quality testing well is located.
14. Plugged and Abandoned Wells/Soil Gas Vapor Survey A soil gas vapor-monitoring program shall be designed to determine a possible lack of zonal isolation along wellbores of plugged and abandoned wells. Red Willow shall attempt to identify any plugged and abandoned wells located within one-quarter (¼) mile of the bottom hole location of any Infill Well. Any plugged and abandoned well within one-quarter (¼) mile of the bottom hole of an Infill Well shall be assessed for risk, taking into account cementing practices reported in the plugged and abandoned reports. Red Willow shall notify the Commission of all results of all risk assessments of plugging procedures. The Commission may appropriate funds under Rule 701 (the Environmental Response Fund) to conduct soil gas monitoring tests to further define the risks. If the monitoring reveals a possible lack of zonal isolation, the Commission may then conduct or order any necessary remediation or other authorized activities.
IT IS FURTHER ORDERED, that the following terms, conditions and provisions of this order shall be applied to additional wells where the surface location is proposed to be sited on lands subject to Commission jurisdiction, in addition to any requirements of applicable existing Commission Rules and Regulations:
15. Well Permit Limitations A Commission hearing shall be required before a drilling permit may be issued for a well site located within one and one-half (1½) miles of the outcrop contact between the Fruitland and Pictured Cliffs Formations. The purpose of the hearing shall be to address potential adverse impacts to the Fruitland outcrop.
16. Annual Drilling Plan The Director shall survey the operator as to its drilling plans for 2017, and annually thereafter. The survey results shall be reported to the Commission for its consideration with respect to the conditions attached to this order.
17. Wildlife The operator shall notify the Colorado Division of Wildlife ("CDOW") of the location of any proposed additional well site and advise the Director of the date such notice was provided. If the Director receives comments from the CDOW within ten (10) days of the date notice was provided, such comments may be considered in applying Rule 508.j.(3)B. conditions.
18. Emergency Preparedness Plan The operator submitting an Application for Permit-to-Drill for a proposed additional well under this order shall file and maintain a digital Emergency Preparedness Plan ("EPP") with La Plata County. The EPP shall include as-built facilities maps showing the location of wells, pipelines and other facilities, except control valve locations that which may be held confidential. The EPP shall include an emergency personnel contact list.
19. Gas and Oil Regulatory Team The Director shall ensure that the La Plata County Gas and Oil Regulatory Team ("GORT") continues to meet as appropriate, but no less than semiannually. GORT meetings may be scheduled more frequently if the members believe a meeting is appropriate. (GORT includes invited member representatives from La Plata County, BLM, the Southern Ute Indian Tribe, industry operators and Commission. Its meetings are open and typically attended by interested area residents.)
20. 3M Mapping, Modeling and Monitoring Project The Director shall ensure that the 3M Technical Peer Review Team is invited to meet as appropriate, but no less than semiannually to review proposals and results related to the 3M Mapping, Modeling and Monitoring Project. 3M Technical Peer Review Team meetings may be scheduled more frequently if the members believe a meeting is appropriate.
21. Post Completion Pressure Build-Up Tests In addition to obtaining a bottom hole pressure on all wells drilled under this order, the operator shall conduct pressure build-up tests two (2) to three (3) months after initial production begins and once every three (3) years thereafter. The operator shall provide the data acquired, an evaluation of the data and the procedures utilized to conduct the pressure build-up tests to the Director within thirty (30) days of the conclusion of each test. After reviewing the quality of the pressure buildup data and the adequacy of the geographic distribution of the data, the Director may reduce the number of wells for which pressure build-up testing is required.
IT IS FURTHER ORDERED:
1. The provisions contained in the above order shall become effective immediately.
2. The Commission expressly reserves the 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 21st day of June, 2017, as of June 12, 2017.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Peter Gowen, Acting Secretary