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, IGNACIO-BLANCO FIELD, LA PLATA COUNTY, COLORADO |
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CAUSE NO. 112
DOCKET NO. 170700409
TYPE: SPACING
ORDER NO. 112-275 CORRECTED
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REPORT OF THE COMMISSION
The Commission heard this matter on July 24, 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 8, Township 33 North, Range 7 West, N.M.P.M., and approve two horizontal wells within the 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 (Operator No. 10000) (“BP” or “Applicant”) 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 Section 8, Township 33 North, Range 7 West, N.M.P.M., 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 Section 8, Township 33 North, Range 7 West, N.M.P.M., 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 Section 8, Township 33 North, Range 7 West, N.M.P.M., for the development and operation of the Fruitland coal seams.
7. On July 11, 2000, the Commission entered Order No. 112-157 which allowed an optional additional well to be drilled in certain lands, including Section 8, Township 33 North, Range 7 West, N.M.P.M., 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 July 10, 2006, the Commission entered Order No. 112-190 which approved up to four wells in established 320-acre drilling and spacing units for certain lands, including Section 8, Township 33 North, Range 7 West, N.M.P.M., with the permitted well to be located no closer than 660 feet from the unit boundary with no interior section line setback, for the production of gas and associated hydrocarbons from the Fruitland coal seams.
9. On May 18, 2015, the Commission entered Order No. 112-253 which pooled all interests in the approximate 320-acre drilling and spacing unit established for a portion of Section 8, Township 33 North, Range 7 West, N.M.P.M., for the development and operation of the Fruitland Coal Formation, to accommodate the Southern Ute 01-08 #1 Well (a/k/a Southern Ute GU 1-8 #1 Well or Southern Ute 1-8 #1 FC Well) (API No. 05-067-06003), and the Southern Ute 01-08 #2 Well (no API No.).
10. On April 19, 2017, BP, by its attorneys, filed with the Commission a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to: 1) establish an approximate 640-acre drilling and spacing unit for the below-described lands (“Application Lands”) that overlays existing 320-acre drilling and spacing units, and approve up to two horizontal wells in the unit, for the production of gas and associated hydrocarbons from the Fruitland Coal Formation; 2) require that the productive interval of the wellbore be located no closer than 660 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other producing well in the Fruitland Coal Formation, except that there shall be no setback between the proposed Wells and there shall be no internal section line setbacks; 3) exclude any existing wells and any future vertical or directional wells producing oil, gas, and associated hydrocarbons from the Fruitland Coal Formation from the approximate 640-acre drilling and spacing unit; and 4) provide that 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:
Township 33 North, Range 7 West, N.M.P.M.
Section 8: All
11. On June 30, 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 L48-Onshore for BP, showed that BP holds oil and gas leasehold interests and has a right to drill in the Application Lands. Land testimony further showed that the proposed horizontal wells will be drilled from a single new well pad. Also, land testimony showed that Applicant has conferred with the Southern Ute Indian Tribe and that the Application is submitted consistent with the August 22, 1991 Memorandum of Understanding (“MOU”) between the Southern Ute Indian Tribe and BLM and Interagency Agreement between the BIA and the BLM, and the August 22, 1991 MOU between the Colorado BLM and the COGCC. Further, the existing 320-acre drilling and spacing units are subject to existing communitization agreements.
13. Geologic testimony and exhibits submitted in support of the Application by Jennifer A. Wadsworth, Geologist for BP, showed that the lowermost commercial coal seams, called the IGNA, which is approximately 20 feet thick, and LEMN-L, which is approximately 15 feet thick, are amalgamated as a single seam to the east, and become separated towards the west; these are the primary targets. Geologic testimony further showed that the overlying coals are grouped into a LEMN zone, which contains thinner and more disconnected seams, and that the thickest LEMN seam is approximately five to six feet thick. Geologic testimony showed that the Fruitland Coal Formation is present throughout the Application Lands and constitute a common source of supply.
14. Engineering testimony and exhibits submitted in support of the Application by Tamara Golson, Reservoir Engineer for BP, showed that the drainage area for the proposed Fruitland Coal Formation wells is estimated at 208 acres, and an approximate 640-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by two horizontal wells producing oil, gas and associated hydrocarbons from the Fruitland Coal Formation. Engineering testimony further showed that Applicant plans to drill two new horizontal wells from one new surface location.
15. 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.
16. BP agreed to be bound by oral order of the Commission.
17. 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 8, Township 33 North, Range 7 West, N.M.P.M., and approve two horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Fruitland Coal Formation.
ORDER
IT IS HEREBY ORDERED:
1. An approximate 640-acre drilling and spacing unit for the below-described lands is hereby established, overlying existing 320-acre drilling and spacing units, and a total of two horizontal wells (“Wells”) within the unit are hereby approved, for the production of oil, gas and associated hydrocarbons from the Fruitland Coal Formation:
Township 33 North, Range 7 West, N.M.P.M.
Section 8: All
2. The productive interval of the Wells will be located no closer than 660 feet from the unit boundaries, with no interior section-line setback. The productive interval of the Wells shall be no closer than 150 feet from any other producing well in the Fruitland Coal Formation, except that there shall be no setback between the Wells, unless the Director grants an exception.
3. The two existing vertical wells and any future vertical or directional wells producing oil, gas, and associated hydrocarbons from the Fruitland Coal Formation are excluded from the approximate 640-acre drilling and spacing unit established by this Order.
4. Production from existing or future vertical or directional wells producing oil, gas, and associated hydrocarbons from the Fruitland Coal Formation shall be allocated according to the drilling and spacing unit in which the existing or future well is drilled.
5. Any horizontal Fruitland Coal Formation wells shall be drilled from an existing well pad or one new pad on the surface of the drilling unit, not to exceed four Fruitland Coal Formation pads, or on adjacent lands with consent of the landowner, unless the Director grants an exception.
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 7th day of August, 2017, as of July 24, 2017.
CORRECTED this 15th day of November, 2017, as of July 24, 2017.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By__________________________________
Julie Spence Prine, Secretary