112-279

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. 180100019

TYPE: POOLING

ORDER NO. 112-279

REPORT OF THE COMMISSION

The Commission heard this matter on March 19, 2018, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to pool all interests in an approximate 320-acre drilling and spacing unit established by Order No. 112-60 for portions of Section 11, Township 34 North, Range 7 West, N.M.P.M. (NUL), and to subject all nonconsenting interests to the cost recovery provisions of § 34-60-116(7), C.R.S., for the drilling of the Le Platt B #1 Well and the Le Platt B #2 Well, for the development and operation of the Fruitland Coal Formation.

FINDINGS

The Commission finds as follows:

1. BP America Production Company (Operator No. 10000) (“BP America” 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 multiple 320-acre drilling and spacing units, 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. Section 11, Township 34 North, Range 7 West, N.M.P.M. (NUL), is subject to this Order for the Fruitland Coal Formation.

5. On August 15, 1988, the Commission entered Order No. 112-61 which amended Order No. 112-60 to establish rules for the production of coalbed methane in the Fruitland coal seams, 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. Section 11, Township 34 North, Range 7 West, N.M.P.M. (NUL), is subject to this Order for the Fruitland Coal Formation.

6. On December 17, 1990 (corrected November 7, 1999), the Commission entered Order No. 112-85 which amended Order No. 112-61 to establish additional field rules, for the development and operation of the Fruitland coal seams. Section 11, Township 34 North, Range 7 West, N.M.P.M. (NUL), is subject to this Order for the Fruitland Coal Formation.

7. On December 9, 2008, the Commission entered Order No. 112-214 which approved up to four wells in certain 320-acre drilling and spacing units, for the production of gas and associated hydrocarbons from the Fruitland coal seams, with the permitted well to be located no closer than 660 feet from the unit boundary and with no setback any interior quarter section line. Section 11, Township 34 North, Range 7 West, N.M.P.M. (NUL), is subject to this Order for the Fruitland Coal Formation.

8. On October 24, 2017 (amended on December, 20, 2017), BP America, by its attorneys, filed a verified Application (“Application”) pursuant to § 34-60-116, C.R.S., for an order to pool all interests in an approximate 320-acre drilling and spacing unit established by Order No. 112-60 for the below-described lands (“Application Lands”), for the development and operation of the Fruitland Coal Formation, and subject any nonconsenting interests to the cost recovery provisions of § 34-60-116(7), C.R.S., for the drilling of the Le Platt B #1 Well (API No. 05-067-08931) and the Le Platt B #2 Well (API No. Pending) (“Wells”):

Township 34 North, Range 7 West, N.M.P.M. (NUL)

Section 11: E½

9. On February 8, 2018, Applicant, 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.

10. Land testimony and exhibits submitted in support of the Application by Scott Hammond, Senior Landman, San Juan North for BP America, showed that all nonconsenting interest owners were notified of the Application and received an Authority for Expenditure ("AFE") and offers to participate in the Le Platt B #2 Well (API No. Pending) only. Further testimony concluded that the AFE sent by the Applicant to the interest owners was a fair and reasonable estimates of the costs of the proposed drilling operation and was received at least 35 days prior to the March 19, 2018 hearing date.

11. Land testimony showed the Applicant complied with the requirements of Rule 530., and is entitled to the cost recovery provisions pursuant to §34-60-116(7), C.R.S., for the Le Platt B #2 Well, but did not provide testimony for any subsequent wells.

12. 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.

13. BP America agreed to be bound by oral order of the Commission.

14. 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 pool all interests in an approximate 320-acre drilling and spacing unit established by Order No. 112-60 for portions of Section 11, Township 34 North, Range 7 West, N.M.P.M. (NUL), and to subject all nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of Le Platt B #2 Well, for the development and operation of the Fruitland Coal Formation.

ORDER

IT IS HEREBY ORDERED:

1. Pursuant to the provisions of § 34-60-116, C.R.S., as amended, of the Oil and Gas Conservation Act, all interests in the approximate 320-acre drilling and spacing unit established by Order No. 112-60 for the below-described lands are hereby pooled, for the development and operation of the Fruitland Coal Formation, effective as of the earlier of the date of the Application, or the date that any of the costs specified in §34-60-116(7)(b)(II), C.R.S., are first incurred for the drilling of the Le Platt B #2 Well (API No. Pending) (“Well”):

Township 34 North, Range 7 West, N.M.P.M. (NUL)

Section 11: E½

2. The production obtained from the drilling and spacing unit shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within the drilling and spacing unit; each owner of an interest in the drilling and spacing unit shall be entitled to receive its share of the production of the Well located on the drilling and spacing unit applicable to its interest in the drilling and spacing unit.

3. Any working interest owner who does not elect to participate in the Well or fails to make a timely election is hereby deemed to be nonconsenting and is subject to the penalties as provided for in §34-60-116(7), C.R.S. The nonconsenting working interest owner must reimburse the consenting owners for his proportionate share of the costs and risks of drilling and operating the Well from his proportionate share of production, subject to non-cost bearing interests, until costs and penalties are recovered as set forth in §34-60-116(7), C.R.S.

4. Any unleased owner who does not elect to participate in the Well or fails to make a timely election is hereby deemed to be nonconsenting and is subject to the penalties as provided for in §34-60-116(7), C.R.S. Any party seeking the cost recovery provisions of §34-60-116(7), C.R.S., shall first comply with subsection (d) for any subsequent well(s).

5. Each nonconsenting unleased owner within the drilling and spacing unit shall be treated as the owner of the landowner's royalty to the extent of 12.5% of its record title interest, whatever that interest may be, until such time as the consenting owners recover, only out of each nonconsenting owner's proportionate 87.5% share of production, the costs specified in §34-60-116(7)(b), C.R.S. After recovery of such costs, each unleased nonconsenting mineral owner shall then own its proportionate 8/8ths share of the well, surface facilities and production, and then be liable for its proportionate share of further costs incurred in connection with the well as if it had originally agreed to the drilling.

6. The operator of the Well drilled on the above-described drilling and spacing unit shall furnish the nonconsenting owners with a monthly statement of all costs incurred, together with the quantity of oil and gas produced, and the amount of proceeds realized from the sale of production during the preceding month.

7. Nothing in this order is intended to conflict with §34-60-116, C.R.S., as amended. Any conflict that may arise shall be resolved in favor of the statute.

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 18th day of April, 2018, as of March 19, 2018

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By_______________________________________

Julie Spence Prine, Secretary