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 RULISON FIELD, |
) CAUSE NO. 139 ) ) ORDER NO. 139-78 ) |
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission
at 9:00 a.m. on July 23, 2007, in Suite 801, The Chancery Building, 1120
Lincoln Street, Denver, Colorado, for an order to allow the equivalent of eight
(8) wells to be optionally drilled in the 640-acre drilling and spacing unit
consisting of Section 26, Township 6 South, Range 94 West, 6th P.M.,
for the production of gas and associated hydrocarbons from the Wasatch
Formation.
FINDINGS
The
Commission finds as follows:
1.
Quantum
Resources Management, LLC (“Quantum”), 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
December 10, 1959, the Commission issued Order No. 139-1, which among other
things, established 640-acre drilling and spacing units, for certain lands
including Section 26, Township 6 South, Range 94 West, 6th P.M., for
the production of gas and associated hydrocarbons from the Wasatch Formation.
5. On February
12, 1988, the Commission issued Order No 139-11, which among other things,
allowed a total of four (4) wells to be optionally drilled in the 640-acre
drilling and spacing units, including Section 26, Township 6 South, Range 94
West, 6th P.M., for production from the Wasatch Formation, with the
permitted well to be located no closer than 600 feet from the boundaries of the
unit and no closer than 1200 feet from any existing Wasatch Formation well.
6. On April
23, 2007, Quantum Resources Management, LLC, by its attorney, filed with the Commission a verified application for
an order to allow the equivalent of eight (8) wells to be optionally drilled in
the 640-acre drilling and spacing unit consisting of Section 26, Township 6
South, Range 94 West, 6th P.M., for the production of gas and
associated hydrocarbons from the Wasatch Formation, with the permitted well to
be located no closer than 600 feet from the boundaries of the unit and no
closer than 1200 feet from any existing Wasatch Formation well, unless an
exception is granted by the Director of the Oil and Gas Commission.
The additional Wasatch Formation wells
proposed on the application lands will not result in the construction of more
than one (1) well site or multi-well site per forty (40) acre nominal
governmental quarter-quarter section, without an exception determination by the
Director of the Commission if, for topographical or other reasons, more than
one (1) well site must be constructed in a particular 40-acre nominal
governmental quarter-quarter section.
7.
On May 29, 2007, Quantum, by its attorney, filed with the Commission a
written request to approve the application based on the merits of the verified
application and the supporting exhibits.
8. Testimony
submitted in support of the application showed that four (4) wells have been
drilled on the application lands for the production of gas and associated
hydrocarbons from the Wasatch Formation. The objective of Quantum’s application is to
authorize the drilling of up to four (4) additional wells in order to promote
efficient and complete drainage of the Wasatch Formation and to prevent
waste. Quantum is not asking to change
the existing setback requirements for the application lands.
9. Testimony
submitted in support of the application showed that Joan Savage is the surface
owner of all surface locations upon which Quantum proposes to drill the
additional four (4) wells. Quantum met
with Ms. Savage to discuss the relief requested in this application. Ms. Savage commented on proposed surface
locations, voiced support for the increased density proposed in the application,
and indicated she did not intend to protest the application.
10. Testimony
submitted in support of the application showed that Quantum also has verbally
contacted
11. Testimony
submitted in support of the application showed that, as proposed, the four (4)
additional Wasatch wells on the application lands will not result in the
construction of more than one well site or multi-well site per forty (40) acre
nominal governmental quarter-quarter section.
Quantum will request an exception determination by the Director of the
Commission if, for topographical or other reasons, more than one well site must
be constructed in a particular 40-acre nominal governmental quarter-quarter
section.
12. Testimony
submitted in support of the application showed that it is Quantum’s intention
to drill these wells using methods that are the least impacting to the surface
and to minimize the time on location to the extent reasonably possible.
13. Testimony
and exhibits submitted in support of the application concluded that the
drilling of an additional four (4) wells producing from the Wasatch Formation
(a) will allow more efficient drainage of the Wasatch Formation, (b) will help
prevent waste, (c) will not violate correlative rights, and (d) will assure the
greatest ultimate recovery of gas and associated substances from the
reservoir.
14. Testimony
and exhibits submitted in support of the application showed that the Wasatch
Formation beneath the application lands consists of a meandering stream system
of irregular thickness and typical of highly lenticular and compartmentalized
fluvial sandstones. Additional testimony
indicated that the thickness is highly variable and there is no correlation
between thickness and well estimated ultimate recovery. Further testimony indicated that the
sandstone reservoirs beneath the application lands are discontinuous and
additional wells and increased drilling density will be necessary to prevent
the waste of identified gas.
15. Testimony
and exhibits submitted in support of the application showed that after studying
the application lands and other data relating to them including, but not
limited to, rate and production data from nearby wells, the initial pressure
data for other Wasatch Formation wells in the Rulison Field are analogous with
the application lands. Additional
testimony indicated that the economics for wells drilled on 8 wells per
640-acre density on the application lands indicate costs should be recovered no
later than after five years, with a rate of return of greater than 15%, making
these wells economic for Quantum.
16. Testimony
and exhibits submitted in support of the application showed that the drilling
of the proposed four (4) additional Wasatch Formation wells in this one section
will also help Quantum further assess the production profile of the Wasatch
Formation and plan future operations.
17. The
above-referenced testimony and exhibits show that the proposed well density
will allow more efficient reservoir drainage, will prevent waste, will assure a
greater ultimate recovery of gas, and will not violate correlative rights.
18. Quantum
Resources Management, LLC agreed to be bound by an oral order of the
Commission.
19.
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.b., the
Commission should enter an order to allow the equivalent of eight (8)
wells to be optionally drilled in the 640-acre drilling and spacing unit
consisting of Section 26, Township 6 South, Range 94 West, 6th P.M.,
for the production of gas and associated hydrocarbons from the Wasatch
Formation.
ORDER
NOW, THEREFORE IT IS ORDERED, that a total of eight
(8) wells are hereby approved to be optionally drilled in the 640-acre drilling
and spacing unit consisting of Section 26, Township 6 South, Range 94 West, 6th
P.M., for the production of gas and associated hydrocarbons from the Wasatch
Formation.
IT
IS FURTHER ORDERED, that all future Wasatch Formation wells shall be located no
closer than 600 feet from the boundaries of the unit and no closer than 1200
from any existing Wasatch Formation well, unless an exception is granted by the
Director of the Oil and Gas Commission.
IT IS FURTHER ORDERED, that no more than
one (1) well site or multi-well site per forty (40) acre nominal governmental
quarter-quarter section shall be constructed, without an exception
determination by the Director of the Commission if, for topographical or other
reasons, more than one (1) well site must be constructed in a particular 40-acre
nominal governmental quarter-quarter section.
IT
IS FURTHER ORDERED, that the permitted wells shall be drilled, on average, if
topographically feasible, from the surface either vertically or directionally
from no more than one pad located on a given quarter quarter section unless
exception is granted by the Director of the Commission.
IT
IS FURTHER ORDERED that the provisions contained in the above order shall
become effective forthwith.
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 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.
ENTERED
this ______ day of August, 2007, as of July 23, 2007.
OIL
AND GAS CONSERVATION COMMISSION
OF
THE STATE OF
By:______________________________________
Patricia
C. Beaver, Secretary
Dated at
August 15, 2007