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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 THE PLATEAU FIELD, MESA COUNTY, COLORADO
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CAUSE NO. 166
ORDER NO. 166-26 |
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission at 9:00 a.m. on May 8, 2008, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to permit, at the option of the operator, two horizontal wells be drilled to and produced from the Mesaverde Formation, in an existing drilling unit in the Plateau Field, in lieu of vertical wells permitted to be drilled to and produced from the Mesaverde Formation.
FINDINGS
The Commission finds as follows:
1. Black Hills Plateau Production, LLC. (“Black Hills”), 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 April 17, 1962, the Commission issued Order No. 166-1, which among other things, established 640-acre drilling and spacing units to consist of entire sections for the production of gas and associated hydrocarbons from the Mesaverde Formation, including the Corcoran Sandstone as its basal member, in certain lands including Section 28, Township 10 South, Range 96 West, 6th P.M., with the permitted well to be located no closer than 1,320 feet from the section line.
5. On January 16, 1973, the Commission issued Order No. 166-11, which allowed a maximum of four wells to be permitted on each existing 640-acre drilling and spacing unit, including Section 28, Township 10 South, Range 96 West, 6th P.M., with each additional well to be located in a quarter section according to the government survey thereof, and no closer than 600 feet from the boundaries of the quarter section upon which it is located, for production from the Mesaverde Formation, including the Corcoran Sandstone.
6. On March 19, 2008, Black Hills, filed with the Commission a verified application for an order for Section 28, Township 10 South, Range 96 West, 6th P.M. providing as follows:
At the option of the operator, in lieu of four vertical wells drilled to and produced from the Mesaverde Formation that two horizontal wells be permitted to be drilled to and produced from the Mesaverde Formation, one traversing the W½ of Section 28 in a northwest to southeast direction (with the wellbore open to production in the Mesaverde Formation in both the NW¼ and the SW¼), and the other traversing the E½ of Section 28 in a northwest to southeast direction (with the wellbore open to production in the Mesaverde Formation in both the NE¼ and the SE¼), and that the drilling window setbacks for a well drilled horizontally in the Mesaverde Formation be no closer than 600 feet from the outer boundaries of the section with no internal setbacks to interior quarter section lines; and
If the operator does not elect to drill either of the horizontal wells that may be permitted as a result of the application, that the provisions of Order No. 166-11 remain in place as to the quarter sections not traversed by a horizontal well, such that one horizontal well (drilled in accordance with the provisions set forth above) and two vertical wells (drilled in accordance with the provisions of Order No. 166-11) be permitted to be drilled to and produce from the Mesaverde Formation.
7. On April 25, 2008, Black Hills 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.
8. Testimony and exhibits submitted in support of the application showed that the W½ and W½ SE¼ of Section 28, Township 10 South, Range 96 West, 6th P.M. is fee surface and fee minerals, and that the NE¼ and E½ SE¼ of Section 28, Township 10 South, Range 96 West, 6th P.M. is federal surface and minerals. Additional testimony showed that the fee surface is divided into numerous surface tracts, with surface access roads and buildings being located on the fee lands. Further testimony indicated that all of Section 28, Township 10 South, Range 96 West, 6th P.M has been communitized for the production of gas and associated hydrocarbons from the Mesaverde Formation, and that the ownership of gas produced from the Mesaverde Formation for any well located in Section 28, Township 10 South, Range 96 West, 6th P. M. is therefore common.
9. Testimony and exhibits submitted in support of the application showed that the Corcoran sandstone, which is a member of the Mesaverde Formation, contains an upper zone and a lower zone. Additional testimony demonstrated that upper zone target sandstone is contoured from 10 to 35 feet in vertical thickness, and that nearly all of the gross sand meets the minimum porosity applicable to the reservoir. Further testimony showed that lower zone target sandstone and is contoured from less than 5 feet in the southeast to greater than 50 feet vertical thickness in the northwest, and that nearly all of the gross sand meets the minimum porosity applicable to the reservoir. Testimony showed that in any horizontal well drilled in said Section 28, two stacked lateral wellbores are planned to efficiently gain producible reservoir exposure in the upper and lower reservoir target zones. Further, the testimony showed that the lower zone well path is planned to provide 3,00 feet of lateral wellbore exposure to the reservoir while the upper zone well path is planned to provide 3,960 feet of exposure to the upper reservoir sandstone.
10. Testimony and exhibits submitted in support of the application showed that a new vertical well drilled in the SW¼ of said Section 28, a permitted location under Order No. 166-11, is expected to produce approximately 720 MMCFG over a 50-year well life. Additional testimony showed that a proposed stacked lateral horizontal well in the W½ of Section 28 is expected to recover approximately 1630 MMCFG in a 50-year well life. Further testimony showed that this greater recovery is due to the longer horizontal wellbore length and the fact that the lateral well will be drilled approximately parallel to the direction of minimum reservoir permeability. Testimony showed that gas will enter the horizontal well along the maximum permeability direction which will improve inflow to the well.
11. The above-referenced testimony and exhibits showed that the proposed horizontal well will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas, and will not violate correlative rights.
12. Black Hills Plateau Production, LLC. 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 based on the Hearing Officer review of the application under Rule 511.b., the Commission should enter an order to allow, at the option of the operator, two horizontal wells be drilled to and produced from the Mesaverde Formation, in an existing drilling unit in the Plateau Field, with the permitted well to be located no closer than 600 feet from the outer boundaries for Section 28, Township 10 South, Range 96 West, 6th P.M.
NOW, THEREFORE IT IS ORDERED, that, in lieu of four vertical wells, two horizontal wells are hereby permitted to be drilled to and produced from the Mesaverde Formation, one traversing the W½ of Section 28 in a northwest to southeast direction (with the wellbore open to production in the Mesaverde Formation in both the NW¼ and the SW¼), and the other traversing the E½ of Section 28 in a northwest to southeast direction (with the wellbore open to production in the Mesaverde Formation in both the NE¼ and the SE¼), and that the drilling window setbacks for a well drilled horizontally in the Mesaverde Formation shall be no closer than 600 feet from the outer boundaries of the section with no internal setbacks to interior quarter section lines for Section 28, Township 10 South, Range 96 West, 6th P.M.
IT IS FURTHER ORDERED, that if the operator does not elect to drill either of the horizontal wells herein approved, the provisions of Order No. 166-11 shall remain in place as to the quarter sections not traversed by a horizontal well, such that one horizontal well (drilled in accordance with the provisions set forth above) and two vertical wells (drilled in accordance with the provisions of Order No. 166-11) shall be permitted to be drilled to and produce from the Mesaverde Formation.
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 (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.
ENTERED this__________day of May, 2008, as of May 8, 2008.
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 23, 2008