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. 166-31
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REPORT OF THE COMMISSION
The Commission heard this matter on January 23, 2012, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, upon application for an order to establish an approximate 280-acre drilling and spacing unit for Section 29, Township 10 South, Range 94 West, 6th P.M., and authorize up to two horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Mancos, Niobrara, Frontier and Mowry Formations.
FINDINGS
The Commission finds as follows:
1. Laramie Energy II, LLC (“Laramie” 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. Rule 318.a. provides that wells to be drilled 2,500 feet in depth or greater shall be located not less than 600 feet from any lease line, and shall not be located less than 1,200 feet from any other producible or drilling well when drilling to the same common source of supply, unless authorized by order of the Commission upon hearing. Section 29, Township 10 South, Range 94 West, 6th P.M. is subject to this rule for the Mancos, Niobrara, Frontier and Mowry Formations (“Deep Formations”).
5. On December 2, 2011, Laramie Energy filed an Amended Application with the Commission for an Order establishing a 320-acre drilling and spacing unit for production of oil, gas and associated hydrocarbons from horizontal wells producing from the Deep Formations in the following lands:
Township 10 South, Range 94 West, 6th P.M.
Section 20: SE¼ SW¼
Section 29: E ½ W½, W½ NW¼, NW¼ SW¼
6. On January 6, 2012, OXY USA, Inc. (“Oxy”), by its attorneys, filed a protest contesting the irregular shape of the originally proposed drilling and spacing unit, specifically a 40-acre tract of land defined as the SE¼ SW¼ of Section 20, Township 10 South, Range 94 West, 6th P.M. Oxy alleged the irregular shape of the proposed Application Lands would prevent it from efficiently developing adjacent lands and violate its correlative rights.
7. On January 12, 2012, Laramie, by its attorney, withdrew a 40-acre tract of lands in Section 20, Township 10 South, Range 94 West, 6th P.M. from the application, and Oxy withdrew its protest.
8. On January 17, 2012, Laramie, by its attorneys, filed with the Commission a verified second amended application (“Second Amended Application”) for an order to establish an approximate 280-acre drilling and spacing unit for the below-listed lands (“Application Lands”), and authorize up to two horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Deep Formations, with the treated interval of the permitted wellbore subject to the setbacks provided in Rule 318.a., without exception being granted by the Director:
Township 10 South, Range 94 West, 6th P.M.
Section 29: E½ W½, W½ NW¼, NW¼ SW¼
9. On January 17, 2012, Laramie, by its attorneys, filed with the Commission a written request to approve the Second Amended 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 N. Arthur Bollen, Consulting Landman for Laramie, showed that the mineral interests underlying the proposed unit are held in fee, there are no producing wells on the Application Lands, and Laramie Energy is an oil and gas leasehold owner in the mineral interests of the Application Lands.
11. Geologic testimony and exhibits submitted in support of the Application by Mark King, Geological and Geophysical Manager for Laramie, showed that the Williams Fork, Iles and Deep Formations underlie and are drilling objectives for wells drilled on the Application Lands, the Deep Formations were deposited as shales and siltstones which are laterally consistent, and their porosity and permeability are much lower than the overlying Mesaverde Group. Additional testimony showed that data collected for the Williams Fork, Iles and Deep Formations in offset wells can be used as a geologic analogy for the Application Lands.
12. Engineering testimony and exhibits submitted in support of the Application by Robert G. Hea, Vice President of Engineering & Operations for Laramie, showed that nearby Williams Fork wells are draining on average approximately 10 acres each, Deep Formation wells in the area are draining on average 9.9 acres, and drilling at 20-acre density would leave significant undrained areas behind and create waste. Additional testimony showed that nearby Iles Formation wells are draining on average 20 acres, development of stand-alone Iles Formation wells are not economic, and developing the Williams Fork, Iles, and Deep Formations in common wellbores drilled on 10-acre density is the most efficient and unobtrusive method to recover these reserves, and would not result in the drilling of unnecessary wells.
13. 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.
14. The Application was reviewed by the Colorado Department of Public Health and Environment (“CDPHE”) pursuant to consultation provisions of Rule 306.d. In a letter dated January 6, 2012, the CDPHE Oil & Gas Coordinator indicated that CDPHE does not believe any additional conditions of approval are necessary for approving the amended Application.
15. Laramie agreed to be bound by oral order of the Commission.
16. Based on the facts stated in the verified Second Amended Application, having received no protests, and based on the Hearing Officer review of the Application under Rule 511., the Commission should enter an order to establish an approximate 280-acre drilling and spacing unit for Section 29, Township 10 South, Range 94 West, 6th P.M., and authorize up to two horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Deep Formations.
ORDER
NOW, THEREFORE IT IS ORDERED, that: 1) an approximate 280-acre drilling and spacing unit, is hereby established, for the below-listed lands; and 2) up to two horizontal wells, are hereby approved, within the unit, for the production of oil, gas and associated hydrocarbons from the Deep Formations, with the treated interval of the permitted wellbore subject to the setbacks provided in Rule 318.a., without exception being granted by the Director:
Township 10 South, Range 94 West, 6th P.M.
Section 29: E½ W½, W½ NW¼, NW¼ SW¼
IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective immediately.
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 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 26th day of January, 2012, as of January 23, 2012.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Peter J. Gowen, Acting Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
January 26, 2012