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 WILLIAMS FORK FORMATION, PARACHUTE FIELD, GARFIELD COUNTY, COLORADO |
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CAUSE NO. 139
DOCKET NO. 1407-UP-249
ORDER NO. 139-121 |
REPORT OF THE COMMISSION
The Commission heard this matter on July 28, 2014, at the Weld County Administration Building - Events Center, 1150 “O” Street, Greeley, CO, upon application for an order to subject all nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the BAT 13C-24-07-96 Well, BAT 33D-24-07-96 Well, BAT 13D-24-07-96 Well, and BAT 34A-24-07-96 Well.
FINDINGS
The Commission finds as follows:
1. Ursa Operating Company LLC (“Ursa” 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, 2013 (corrected January 9, 2014), the Commission entered Order Nos. 139-116 and 440-67 which established an approximate 563.10-acre drilling and spacing unit and approved 10-acre bottomhole density for up to 56 wells within the unit for the production of oil, gas and associated hydrocarbons from the Williams Fork Formation. Section 24, Township 7 South, Range 96 West, 6th P.M. is subject to this Order for the Williams Fork Formation.
5. On July 29, 2013, the Commission entered Order Nos. 139-117 and 440-69 which pooled all interests in Section 24, Township 7 South, Range 96 West, 6th P.M. and subjected all nonconsenting interests to the cost recovery provisions of §34-60-116 (7), C.R.S., for the BAT 32C-24-07-96 Well, the BAT 32B-24-07-96 Well, the BAT 12B-24-07-96 Well and the BAT 12A-24-07-96 Well, for development and operation of the Williams Fork Formation.
6. On January 27, 2014, the Commission entered Order No. 139-118 which subjected all nonconsenting interests to the cost recovery provisions of §34-60-116 (7), C.R.S., for the drilling of the BAT 12C-24-07-96 Well, the BAT 12D-24-07-96 Well, the BAT 13A-24-07-96 Well, the BAT 13B-24-07-96 Well, the BAT 32D-24-07-96 Well, the BAT 33A-24-07-96 Well, the BAT 33B-24-07-96 Well, and the BAT 33C-24-07-96 Well, for the development and operation of the Williams Fork Formation. Section 24, Township 7 South, Range 96 West, 6th P.M. is subject to this Order for the Williams Fork Formation.
7. On June 17, 2014, the Commission entered Order No. 139-119 which, among other things, vacated an approximate 563.10-acre drilling and spacing unit established by Order Nos. 139-116 and 440-67 for certain lands within Section 24, Township 7 South, Range 96 West, 6th P.M. located south of the center line of the Colorado River, established an approximate 560-acre drilling and spacing unit for the production of oil, gas and associated hydrocarbons from the Williams Fork and Iles Formations, and amended Order Nos. 139-117, 440-69 and 139-118 to conform with the Application Lands. Section 24, Township 7 South, Range 96 West, 6th P.M. is subject to this Order for the Williams Fork Formation.
8. On May 29, 2014 (Amended June 4, 2014), Ursa, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S. for an order to subject all nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., 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), C.R.S. were first incurred for the drilling of the BAT 13C-24-07-96 Well (API No. 05-045-22098), BAT 33D-24-07-96 Well (API No. 05-045-22107), BAT 13D-24-07-96 Well (API No. 05-045-20556), and BAT 34A-24-07-96 Well (API No. 05-045-22092)(“Wells”):
Township 7 South, Range 96 West, 6th P.M.
Section 24: Lots 1, 5 and 6; and adjacent lands thereto, lying up to the center line of the Colorado River, NE¼ NE¼; S½ NE¼; S½ (excluding Lots 2, 3 and 4, North of the Colorado River)
9. On July 15, 2014, Ursa, 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 Jarred McGhee, Landman for Ursa, showed that all nonconsenting interest owners were notified of the Application and received an Authority for Expenditure ("AFE") and offer to participate in the Well. Further testimony concluded that the AFE sent by the Applicant to the interest owners was a fair and reasonable estimate of the costs of the proposed drilling operation and was received at least 30 days prior to the July 28, 2014 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 BAT 13C-24-07-96 Well, BAT 33D-24-07-96 Well, BAT 13D-24-07-96 Well, and BAT 34A-24-07-96 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. Ursa 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 Unit review of the Application under Rule 511., the Commission should enter an order to subject all nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the BAT 13C-24-07-96 Well, BAT 33D-24-07-96 Well, BAT 13D-24-07-96 Well, and BAT 34A-24-07-96 Well.
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 nonconsenting interests are hereby subjected to the cost recovery provisions of §34-60-116(7), C.R.S., 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), C.R.S. are first incurred for the drilling of the BAT 13C-24-07-96 Well (API No. 05-045-22098), BAT 33D-24-07-96 Well (API No. 05-045-22107), BAT 13D-24-07-96 Well (API No. 05-045-20556), and BAT 34A-24-07-96 Well (API No. 05-045-22092):
Township 7 South, Range 96 West, 6th P.M.
Section 24: Lots 1, 5 and 6; and adjacent lands thereto, lying up to the center line of the Colorado River, NE¼ NE¼; S½ NE¼; S½ (excluding Lots 2, 3 and 4, North of the Colorado River)
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. The nonconsenting leased (working interest) owners must reimburse the consenting working interest owners for their share of the costs and risks of drilling and operating the Well (including penalties as provided by §34-60-116(7)(b), C.R.S.) out of production from the drilling and spacing unit representing the cost-bearing interests of the nonconsenting working interest owners as provided by §34-60-116(7)(a), C.R.S.
4. Any unleased owners are hereby deemed to have elected not to participate and shall therefore be deemed to be nonconsenting as to the Well and be subject to the penalties as provided for by §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. as amended. 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.
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 13th day of August, 2014, as of July 28, 2014.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary