112-71

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 IGNACIO-BLANCO FIELD, LA PLATA AND ARCHULETA COUNTIES, COLORADO

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CAUSE NO. 112

ORDER NO. 112-71

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on August 21, 1989 at 8:30 a.m. in Room 101, State Education Building, 201 East Colfax, Denver, Colorado after giving Notice of Hearing as required by law, on the verified application of Amoco Production Company for an order that would designate the Arthur Mason Gas Unit "B" No. 1 as the permitted well for the 320-acre drilling and spacing unit consisting of the E1/2 of Section 20, Township 34 North, Range 9 West, South of the Ute Line at a well location exception, and that the production of the well be limited to a recovery of 83.48% of the calculated ultimate recovery, that the production limit be reviewed after recovery of 50% and 75% of the approved amount and that the production limit be reviewed and redetermined if an infill drilling order would be approved by the Commission.

FINDINGS

The Commission finds as follows:

1. Amoco Production Company, 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.

4. In Cause 112, the Commission has issued various orders, including Order No. 112-6 which established 320-acre drilling and spacing units for the Fruitland - Pictured Cliffs formations. Order No. 112-46 was issued on July 16, 1979 and allowed an additional well to be drilled on the unit with the permitted well locations no closer than 990 feet to the boundaries of the quarter section. Order No. 112-46 also allowed the Director to grant exception to the permitted well locations, without notice or hearing, to avoid topographical and surface hazards. If for any other reasons, exceptions may be granted provided the owners of the cornering and contiguous units towards which the proposed location would be moved, file a waiver or consent, in writing, agreeing to said exception.

5. On October 19, 1987, Amoco Production Company submitted an Application to Drill the Arthur Mason Gas Unit "B" No. 1 at a location 165 feet from the north line and 2290 feet from the east line, Section 20, Township 34 North, Range 9 West, South of the Ute Line, La Plata County, Colorado. Amoco selected the location to minimize surface conflicts, and furnished information concerning Amoco's lease position in cornering and contiguous leases. The Application was approved by the Commission on October 19, 1987 and assigned Permit No. 87-773.

6. On or about January 12, 1988, Amoco Production Company drilled and set pipe at the above location and the well is currently awaiting completion efforts in the Fruitland Coal seams.

7. Amoco has been unable to obtain waivers from all the owners of the cornering and contiguous units to the unit E1/2 Section 20.

8. On June 17, 1988 the Commission entered Order No. 112-60 which established separate drilling and spacing units and other field rules for the production of methane gas from the Fruitland Coal seams. On August 15, 1988 the Commission entered Order No. 112-61 which established additional field rules. On November 21, 1988 the Commission entered Order No. 112-62 which amended Order No. 112-60 by deleting certain lands from the area spaced by Order No. 112-60. The Clovis Gas Unit "B" No. 1 is located within the Fruitland Coal seam spaced area established by Order Nos. 112-60, 61 and 62.

9. The Hearing Officer held an administrative hearing in this matter on August 16, 1989 at which time Amoco presented testimony concerning the lease positions in all affected spacing units. The Hearing Officer accepted testimony and exhibits entered by Amoco in the hearing for Order No. 112-63 pertaining to reservoir potential for methane production according to currently known engineering techniques, geological extent of the various coal seams under the affected units, and consideration of methods to address the drainage which might occur across unit lines.

10. Additional testimony was taken by the Hearing Officer establishing an estimated ultimate recovery of 11.00 billion cubic feet of gas from the Arthur Mason Gas Unit "B" No. 1 with a percentage cap of 83.48% of the ultimate recovery which is 9.18 billion cubic feet, and that the cumulative production be reviewed periodically but at least at a 50% recovery or 5 years. The estimated ultimate recovery and other parameters should be reexamined at a hearing if an order should be entered allowing infill drilling or changes in unit size in the Fruitland Coal seam area as established in Order Nos. 112-60, 61 and 62.

11. There were no protests filed against this application and the Hearing Officer recommends approval of the application.

12. The Commission should enter an order establishing the Arthur Mason Gas Unit "B" No. 1, located 165 feet FNL and 2290 feet FEL, Section 20, Township 34 North, Range 9 West, South of the Ute Line, La Plata County, as the designated well for the drilling and spacing unit consisting of the E1/2 of said Section 20 at an exception location to Order No. 112-60, that the estimated ultimate recovery of methane gas from the Fruitland Coal seams be set at 11.00 billion cubic feet, and that a production percentage cap of 83.48% of the estimated ultimate recovery of 9.18 billion cubic feet be set. The Commission staff should monitor the cumulative production of said well, and report to the Commission for review and to other interested parties. Amoco should report the annual production and cumulative production to the Commission in April of each year.

13. The order should also have a provision for review and possible redetermination of the production cap should an order be entered changing the drilling and spacing unit size as established by Order Nos. 112-60, 61 and 62.

ORDER

NOW, THEREFORE, IT IS ORDERED, that Order Nos. 112-60, 61 and 62 be amended and that Amoco Production Company well Arthur Mason Gas Unit "B" No. 1 is the designated well for the drilling and spacing unit consisting of the E1/2 Section 20, Township 34 North, Range 9 West, South of the Ute Line, La Plata County, Colorado at an exception location 165 feet FNL and 2290 FEL of said Section 20.

IT IS FURTHER ORDERED, that the estimated ultimate recovery of methane gas from the Fruitland Coal seams underlying said unit be set at 11.00 billion cubic feet, and that a production limit of 83.48% of the estimated ultimate recovery of 9.18 billion cubic feet of methane gas be set. Amoco shall report the annual and cumulative production to the Commission in April of each year. The Commission staff shall regularly monitor the cumulative production from this well and report this information to the Commission and other interested parties for review with the first report due no later than three years following the date of first production.

IT IS FURTHER ORDERED, that the estimated ultimate recovery and production cap be reviewed and possibly redetermined should the Commission enter an order changing the drilling and spacing unit size as established by Order Nos. 112-60, 61, and 62, or an order which would allow infill drilling for the Fruitland Coal seams.

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith as all parties agreed to be bound by the oral order of the Commission.

IT IS FURTHER ORDERED, that the Commission expressly reserves its rights, after giving notice and hearing, to alter, amend or repeal any and/or all of the above orders.

ENTERED this 22nd day of August, 1989, as of August 21, 1989.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

Dennis R. Bicknell, Secretary