134-1

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 "D" SAND OF THE NUGGET FIELD, WASHINGTON COUNTY, COLORADO

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CAUSE NO. 134

ORDER NO. 134-1

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on August 18, 1959, at 10:00 a.m., in the Game Room of the Albany Hotel, Denver, Colorado, after publication of Notice of Hearing as required by law, setting a hearing date for June 23, 1959 on the application of the Monsanto Chemical Company for an order (a) establishing the boundaries of the Nugget Field; (b) determining that the "D" sand formation underlying certain lands in Washington County, Colorado, is one separate pool or common source of supply of oil and gas; (c) establishing the maximum efficient rate of production in said field or pool, and limiting production therefrom accordingly; and (d) allocating the allowable production among the several wells or producing properties in the field or pool on reasonable basis as prescribed in the Act.

On June 19, 1959, the Dawson Oil Corporation filed with the Commission a Motion for Continuance the above entitled matter.

On June 20, 1959, the Monsanto Chemical Company filed its Motion to immediately reset the above entitled matter for hearing on June 23, 1959, and this Motion was argued on June 23, 1959. After hearing the arguments of counsel as to a date for a hearing, the Commission set this matter for hearing on August 18, 1959. This continuance was granted with the provision that no produced gas be flared unless otherwise authorized, and with the further provision that all available records pertaining to the Nugget Field were to be furnished forthwith to the Director of Conservation by all operators in the field, and that should the Director determine that the operation of the field in the present manner might cause waste, he was to advise the Commission of this fact add the Commission would vacate the original date for hearing and set the matter for hearing upon ten days’ notice.

FINDINGS

The Commission finds as follows:

1. That due notice of the time, place and purpose of the hearing has been given in all respects as required by law.

2. That 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.

3, That the "D" sand constitutes a common source of supply of oil and gas underlying the following described lands in Washington County, Colorado, to-wit:

Township 1 South, Range 56 West, 6th P.M.

Section 19: SE¼	Section 29: N½
Section 20: S½, S½N½	Section 30: E½NW¼, NE¼

and that such area, is referred to as the Nugget Field.

4. That all parties agreed that two driving mechanisms are at work in the "D" sand reservoir of the Nugget Field; namely, water encroachment and solution gas drive; and that the applicant, Monsanto Chemical Company, contended that at the present time the major driving mechanism of the "D" sand reservoir of the Nugget Field is water encroachment, and that the secondary driving mechanism is gas in solution; and that a restriction of 125 barrels of oil and 150 Mcf. of gas per well per day would tend to prevent waste and increase the ultimate recovery of oil; and that representatives of the Dawson Oil Corporation contended that the major driving mechanism of said reservoir is gas in solution, and that there is evidence of water encroachment, and that present unrestricted production practices should be maintained until studies now under way for determination of a maximum efficient rate of production are completed.

5. That insufficient evidence was submitted at the hearing to determine the predominating producing mechanism, and that in order to accumulate such necessary data, monthly gas-oil-ratio tests and semi-annual bottom-hole-pressure surveys should be conducted; and that during this period of data accumulation, a maximum oil allowable of 150 barrels per well per day and a penalty gas-oil ratio of 1000 cubic feet of gas per barrel of oil should be imposed in order to prevent waste; and that, further, in order that the operators may produce any one lease in the most efficient manner possible, the oil allowable of any one well or combination of wells on any given lease may be transferred and produced from any other well or combination of wells on the same lease provided that such a transfer will result in the production of less gas.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the following rules and regulations shall be and the same are hereby adopted for the "D" sand formation of the Nugget Field, Washington County, Colorado:

Rule 1. The "D" sand formation constitutes a common source of supply of oil and gas underlying the following described lands in Washington County, Colorado, to-wit:

Southeast Quarter (SE¼) of Section Nineteen (19); South Half and South Half of the North Half (S½, S½N½) of Section Twenty (20); North Half (N½). of Section Twenty-nine (29), and East Half of the Northwest Quarter, and Northeast Quarter (E½NW¼, NE¼) of Section Thirty (30), in Township One (1) South, Range Fifty-six (56) West of the 6th P.M.,

and such area shall henceforth be known as the Nugget Field.

Rule 2. Production Limitation.

a. The daily oil allowable for any one well shall be the amount of oil it is capable of producing, as determined by tests required by Rule 3 hereof; provided, however, that the maximum oil allowable shall not exceed One Hundred Fifty (150) barrels per day; and provided further, that the oil allowable for wells which have a gas-oil ratio in excess of One Thousand (1000) cubic feet of gas per barrel of oil shall be adjusted by the following formula:

Daily Oil allowable (bbls) =	150, 000 cubic feet of gas
	gas-oil ratio of well

b. In order that the operators may produce any one lease in the most efficient manner possible, the oil allowable of any one well or combination of wells on any given lease may be transferred and produced from any other well or combination of wells on the same lease, provided that such a transfer will result in the production of less gas.

c. Under and over production of oil shall be adjusted on a monthly basis. Underproduction of oil during any one month may be made up only during the month immediately following; and any over production of oil obtained during any one month shall be made up during the month immediately following. Any overproduction of oil in excess of ten per cent (10%) of the total monthly allowable shall be considered a violation, unless a valid reason is given.

Rule 3. Gas-Oil-Ratio Tests.

a. Operators and owners of wells producing from the "D" sand formation of the Nugget Field shall make a monthly gas-oil-ratio test of each of his producing wells, such tests to be taken during the first twenty (20) days of each month, and the results of such tests shall be reported to the Commission on OGCC Form-9 on or before the twenty-fifth (25th) day of the same month. Such tests shall be the basis for calculating the volume of oil allowed to be produced for the following month, and subject well shall be produced at its normal stabilized rate of production for a period of forty-eight (48) consecutive hours, and the gas-oil ratio shall be computed on the basis of the measurement of oil and gas during the last twenty-four (24) hours of said period, and a schedule shall be submitted to the Commission and to offset operators prior to testing, showing the wells and respective dates of tests.

b. Any operator may apply for an amended allowable upon submission of authorized test or retest results.

Rule 4. Datum Reservoir Pressure Surveys.

A determination of datum reservoir pressure shall be made during the months of April and October of each year. All wells capable of producing from the "D" sand reservoir of the Nugget Field shall be shut in by 9 a.m. on the first day of each test month, and shall remain shut in until the completion of such survey. Datum reservoir pressure shall be determined after the entire field has been shut in for a period of at least forty-eight (48) hours, and such pressures shall be measured with a bomb and reported at a datum of Six Hundred (600) feet below sea level. The results of such surveys shall be reported to the Commission within fifteen (15) days after the completion of each survey. The Commission hereby reserves its right to amend all or part of this rule without notice and hearing where, in its opinion, such changes do not detract from the intent of this rule.

Rule 5. Individual Well Production Reports.

Operators and owners of wells producing from the "D" sand reservoir of the Nugget Field shall file with the Commission a monthly report of production by wells, as required on a form prescribed by the Commission, covering the month next preceding the date of filing, on or before the twenty-fifth (25th) day of each month.

IT IS FURTHER ORDERED, that this order shall become effective October 1, 1959.

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

ORDERED this 3rd day of September, 1959.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

Annabel Hogsett, Secretary

Dated at Suite 380

1580 Logan Street

Denver, Colorado 80203