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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 MAMM CREEK FIELD, GARFIELD COUNTY, COLORADO |
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CAUSE NO. 191
ORDER NO. 191-36 |
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission at 8:00 a.m. on October 23, 2006, in Room 200, Las Animas County Court House, 200 East First Street, Trinidad, Colorado, for an order to allow the equivalent of one (1) well per 10 acres, for certain lands in Section 8, Township 6 South, Range 92 West, 6th P.M., for production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.
The Commission finds as follows:
1. Antero Resources Piceance Corporation (“Antero”), 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. of the Rules and Regulations of the Oil and Gas Conservation Commission requires that wells drilled in excess of two thousand five hundred (2,500) feet in depth be located not less than six hundred (600) feet from any lease line, and located not less than one thousand two hundred (1,200) feet from any other producible or drilling oil or gas well when drilling to the same common source of supply. Section 8, Township 6 South, Range 92 West, 6th P.M., is subject to this rule.
Section 8: Lot 8, Lot 9, NEĽ SEĽ and S˝ SEĽ
6. On October 16, 2006, Antero, 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.
7. Testimony and exhibits submitted in support of the application showed lands in the vicinity of the application lands which have been previously approved by the COGCC for increased density in the Williams Fork and Iles Formations, covering an area generally between Parachute and Silt.
8. Testimony and exhibits submitted in support of the application showed that Antero controls an undivided 50% of the leasehold within the application lands. The multiple parcels require Antero to space the lands to coordinate efficient development.
9. Testimony and exhibits submitted in support of the application showed that the unleased mineral interest owners within or immediately abutting the application area have received notice of the application and no objections or protests to the application have been received.
10. Testimony and exhibits submitted in support of the application showed that the Williams Fork Formation is the topmost formation of the Mesaverde Group and that the sandstones within the Williams Fork Formation form highly discontinuous reservoir units which were deposited in a series of sinuous fluvial systems.
11. Testimony and exhibits submitted in support of the application showed that the internal structures of Williams Fork Sandstones described in cores and in outcrops indicate they were deposited in a setting similar to the depositional environment of the Mississippi River Valley. Antero believes this supports the interpretation that the ancient Williams Fork Formation reservoir units are highly discontinuous.
12. Testimony and exhibits submitted in support of the application showed that many of the reservoir units are discontinuous between wells with close well spacing and would not be drained by a single well on wider spacing. Additional testimony indicated that sands which may appear to be continuous from subsurface correlations can be shown to be discontinuous when fully exposed at the surface. Further testimony and exhibits showed that the median channel width of the total 136 sand body measurements is only 400 feet.
13. Testimony and exhibits submitted in support of the application showed that the top of the Iles Formation is located below the base of the Cameo Coal member of the Williams Fork Formation. The Iles Formation is a marine sandstone and shale sequence and contains a series of marine sandstone members know as the Rollins, Corcoran, and Cozzette. This series of sandstones underlies the entire application area and has been mapped to outcrop and the Mamm Creek Field to the south. The Iles Formation tight sandstones are characterized by low to moderate porosity (5% to 10%). Typically only a small fraction of the gross reservoir units have high enough effective porosity to yield economic production rates. The lateral distribution of the effective reservoir units is also variable.
14. Testimony and exhibits submitted in support of the application showed that based on previously drilled pilot projects, 10-acre density wells performed roughly as well as the other wells with only one well under performing the 40-acre density wells, which was reported to have been drilled into the fracturing and drainage pattern of the offsetting well. Additional testimony and exhibits showed that a large majority of the pressure tests taken in the pilot projects showed no depletion of the reservoir pressure due to wells drilled prior to the infill, resulting in new gas that would not be drained by the wells drilled prior to the infill drilling program.
15. Testimony and exhibits submitted in support of the application showed the single well economics for a 10-acre density Williams Fork Formation well if it recovers approximately 730 MMCF of gas, as estimated from the pilot projects, will have a 14.4% rate of return and 5 year payout, meeting Antero’s requirement for drilling the wells.
16. Testimony and exhibits submitted in support of the application showed that the drainage areas calculated for the Cozzette and Corcoran intervals from each well are in the 12-15 acre range, indicating that the wells must be drilled on less than 20-acre well density in order to effectively drain the reservoir.
17. Testimony and exhibits submitted in support of the application showed that the Iles Formation in the area could not be economically developed with wells drilled and completed only in the Iles Formation. The rates of return are well below 5%, the wells do not pay out in any reasonable time frame, and reserves would not be recovered in the foreseeable future unless they are completed as a part of the Williams Fork Formation wells drilled at the same location.
18. The above-referenced testimony and exhibits show that the proposed increased 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.
19. Antero Resources Piceance Corporation agreed to be bound by oral order of the Commission.
20. 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 one (1) well per 10 acres, for certain lands in Section 8, Township 6 South, Range 92 West, 6th P.M., for production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.
ORDER
Section 8: Lot 8, Lot 9, NEĽ SEĽ and S˝ SEĽ
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
November 15, 2006