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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 IN RULISON FIELD, GARFIELD COUNTY, COLORADO |
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CAUSE NO. 139
ORDER NO. 139-57 |
This cause came on for hearing before the Commission at 9:00 a.m. on April 24, 2006, Suite 801, in The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order pooling all non-consenting interests in the 640-acre drilling and spacing unit consisting of Section 12, Township 7 South, Range 95 West, 6th P.M., for the development and operation of the Williams Fork Formation.
The Commission finds as follows:
1. Williams Production RMT Company (“Williams Production”), 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 May 18, 1990, the Commission issued Order No. 139-16 which, among other things, established 640-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Mesaverde Formation with the permitted well to be located no closer than 990 feet from the boundaries of the unit for certain lands including Section 12, Township 7 South, Range 96 West, 6th P.M.
5. On October 7, 2005, the Commission issued Order No. 139-28, which among other things, allowed sixteen (16) wells to be optionally drilled into and produced from the Williams Fork Formation, with the permitted well to be located no closer than 400 feet from the boundaries of the unit and no closer than 800 feet from any existing Williams Fork Formation well or wells.
6. On March 2, 2006, Williams Production RMT Company, by its attorney, filed with the Commission a verified application for an order to pool all non-consenting interests in the 640-acre drilling and spacing unit consisting of Section 12, Township 7 South, Range 95 West, 6th P.M., for the development and operation of the Williams Fork Formation. The applicant plans to drill the Diamond Elk PA 21-12, Diamond Elk PA 22-12, Diamond Elk PA 41-12 and Diamond Elk PA 42-12 wells located in Section 12, Township 7 South, Range 95 West, 6th P.M. during 2006.
7. Testimony and exhibits presented at the administrative hearing showed that subsequent to the filing of the application three (3) working interest owners elected to participate in the drilling of the four (4) wells, and therefore their interests do not need to be pooled.
8. Testimony and exhibits presented at the administrative hearing showed that Williams Production has just less than 100% of the mineral interests leased in Section 12, and that a portion of those leases are expiring in May 2006. Additional testimony showed that the parties to be pooled and their interests are as follows: Double B Ranch – 1.52 acres, Josh and Janna Lyons – ⅛ of approximately 35 acres, Douglas Boyles – approximately 45 acres. Further testimony indicated that the Lyons own the surface lands in Section 12.
9. Testimony and exhibits presented at the administrative hearing showed that an Authorization For Expenditure and an Operating Agreement to drill, complete, and equip the Diamond Elk PA 21-12, Diamond Elk PA 22-12, Diamond Elk PA 41-12 and Diamond Elk PA 42-12 wells was sent to the three (3) parties on March 15, 2006 and none of the parties have signed the documents.
10. Testimony and exhibits presented at the administrative hearing showed reasonable attempts have been made to lease or seek consent to participate in the drilling of this well from the three (3) parties, but have been unsuccessful. Additional testimony showed that Williams Production has complied with Rule 530. of the Commission’s Rules and Regulations.
11. Testimony and exhibits presented at the administrative hearing showed that the lease terms offered were some of the highest terms in the area at $2000.00 per net mineral acre, 18% royalty, and three (3) year paid up leases, including lease amendments offering no surface occupancy. Additional testimony indicated that the company will allow any of the parties to participate if they notify Williams prior to the spudding of the first well.
12. Williams Production RMT Company agreed to be bound by oral order of the Commission.
13. Based on the facts stated in the verified application, having received no protests and having been heard by the Hearing Officer who recommended approval, the Commission should enter an order pooling all non-consenting interests in the 640-acre drilling and spacing unit consisting of Section 12, Township 7 South, Range 95 West, 6th P.M., for the development and operation of the Williams Fork Formation.
ORDER
NOW, THEREFORE IT IS ORDERED that, pursuant to the provisions of §34-60-116 C.R.S. as amended, of the Oil and Gas Conservation Act of the State of Colorado, all non-consenting interests in the 640-acre drilling and spacing unit consisting of Section 12, Township 7 South, Range 95 West, 6th P.M., are hereby pooled for the development and operation of the Williams Fork Formation.
IT IS FURTHER ORDERED, that the production obtained from each drilling 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 each drilling unit; each owner of an interest in each drilling unit shall be entitled to receive his/her share of the production of the well located on each drilling unit applicable to his interest in each drilling unit.
IT IS FURTHER ORDERED, that said owners are hereby deemed to have elected not to participate and shall therefore be deemed to be nonconsenting as to the well(s) and be subject to the penalties as provided for by §34‑60‑116 (7), C.R.S.
IT IS FURTHER ORDERED, that any nonconsenting unleased mineral owner within the spacing unit shall be treated as the owner of the landowner's royalty to the extent of 12.5% of his/her record title interest, whatever that interest may be, until such time as the consenting owner recovers, only out of the non-consenting 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, the non-consenting mineral owner shall then own his/her proportionate 8/8ths share of the well, surface facilities and production, and then be liable for his/her proportionate share of further costs incurred in connection with the well as if he/she had originally agreed to the drilling.
IT IS FURTHER ORDERED, that the operator of any well drilled on the above-described unit shall furnish all non-consenting 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.
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.
IT IS FURTHER ORDERED, that under the State Administrative Procedure Act the Commission considers this order to be final agency action for purposes of judicial review within thirty (30) days after the date this order is mailed by the Commission.
IT IS FURTHER ORDERED, that an application for reconsideration by the Commission of this order is not required prior to the filing for judicial review.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By
Patricia C. Beaver, Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
May 12, 2006