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 MAMM CREEK FIELD,

GARFIELD COUNTY, COLORADO

 

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CAUSE NO.   191

 

ORDER NO.   191-37

 

            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 establish an approximate 186.3-acre drilling and spacing unit for certain lands in Township 6 South, Range 93 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations and to allow the equivalent of one (1) well per 10 acres.

 

FINDINGS

 

                        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 Colorado Oil and Gas Conservation Commission requires wells drilled in excess of 2,500 feet in depth to be located not less than 600 feet from any lease line, and not less than 1,200 feet from any other producible or drilling oil or gas well when drilling to the same common source of supply.  Section 12, Township 6 South, Range 93 West, 6th P.M. is subject to this rule.

 

                        5.  On August 31, 2006, Antero, by its attorney, filed with the Commission a verified application for an order to establish an approximate 186.3-acre drilling and spacing unit for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations for the below-listed lands and to allow the equivalent of one (1) well per 10 acres:

 

Township 6 South, Range 93 West, 6th P.M.

All that part of Section 12, Township 6 South, Range 93 West, 6th P. M., lying in the N˝ of said Section 12 more particularly described as follows:

 

Beginning at the Northwestern corner of Section 12; thence South 00°41'24'' West a distance of 2266.6 feet; thence North 66°30' East a distance of 300.70 feet; thence North 69°53' East a distance of 453.30 feet; thence North 75°31' East a distance of 551.10 feet; thence North 78°41' East a distance of 764.30 feet; thence North 78°10' East a distance of 379.80 feet; thence North 82°34' East a distance of 278.10 feet; thence North 78°01' East a distance of 1011.30 feet; thence North 77°24' East a distance of 1677.20 feet to a point on the East line of Section 12; thence North 00°52'12'' East a distance of 938.20 feet; thence North 89°11' West a distance of 5245.20 feet to the point of beginning.

 

                        That as to all future Williams Fork Formation wells to be drilled upon the application lands, each well may be located anywhere downhole in the established drilling and spacing unit but no closer than one hundred (100) feet from the boundaries of the unit, without exception being granted by the Director, except that with respect to units or lease lines abutting or cornering lands for which the Commission has not at the time of the drilling permit application granted the right to drill 10-acre density wells, the well shall be located downhole no closer than 200 hundred (200) feet from the boundary of the drilling unit so abutting or cornering such lands.  

 

                        That as to all future Iles Formation wells to be drilled upon the application lands within drilling and spacing units (granted pursuant to this Application), the well should be located downhole anywhere in the drilling and spacing unit but no closer than 100 feet from the boundaries of the unit without exception being granted by the Director of the Oil and Gas Conservation Commission.  It is provided however that in cases where the application lands abut or corner lands in respect of which the Commission has not at the time of drilling permit application granted the right to drill 10-acre density Iles Formation wells, the well should be located downhole no closer than 400 feet from the boundary or boundaries of the drilling unit so abutting or cornering such lands without exception being granted by the Director of the Oil and Gas Conservation Commission. 

 

                        That all Williams Fork Formation and Iles Formation wells drilled upon the application lands will be drilled 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 Colorado Oil and Gas Conservation Commission.  In addition, wells drilled to the Iles Formation may only be drilled and completed in connection with drilling of wells to the Williams Fork Formation.

 

                        6.  On October 13, 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 approximately 38.65% of the leasehold within the lands covered by the proposed drilling and spacing unit.  The multiple parcels require Antero to space the lands to coordinate efficient development.  Although Antero is requesting an irregular shaped drilling and spacing unit, it is necessary to do so because of numerous leases or unleased mineral ownership interests within the area constituting the application lands.

 

                        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 spacing and 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.       No protests to the application have been filed with the Commission or the Applicant.

 

                        21.       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 establish an approximate 186.3-acre drilling and spacing unit for certain lands in Township 6 South, Range 93 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations and to allow the equivalent of one (1) well per 10 acres.

 

ORDER

 

                        NOW, THEREFORE, IT IS ORDERED, that an approximate 186.3-acre drilling and spacing unit is hereby established for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations for the below-listed lands, allowing the equivalent of one (1) well per 10 acres:

 

Township 6 South, Range 93 West, 6th P.M.

All that part of Section 12, Township 6 South, Range 93 West, 6th P. M., lying in the N˝ of said Section 12 more particularly described as follows:

 

Beginning at the Northwestern corner of Section 12; thence South 00°41'24'' West a distance of 2266.6 feet; thence North 66°30' East a distance of 300.70 feet; thence North 69°53' East a distance of 453.30 feet; thence North 75°31' East a distance of 551.10 feet; thence North 78°41' East a distance of 764.30 feet; thence North 78°10' East a distance of 379.80 feet; thence North 82°34' East a distance of 278.10 feet; thence North 78°01' East a distance of 1011.30 feet; thence North 77°24' East a distance of 1677.20 feet to a point on the East line of Section 12; thence North 00°52'12'' East a distance of 938.20 feet; thence North 89°11' West a distance of 5245.20 feet to the point of beginning.

 

                        IT IS FURTHER ORDERED, that for all future Williams Fork Formation wells to be drilled upon the application lands, each well shall be located anywhere downhole in the established drilling and spacing unit but no closer than one hundred (100) feet from the boundaries of the unit, without exception being granted by the Director, except that with respect to units or lease lines abutting or cornering lands for which the Commission has not at the time of the drilling permit application granted the right to drill 10-acre density wells, the well shall be located downhole no closer than 200 hundred (200) feet from the boundary of the drilling unit so abutting or cornering such lands. 

 

                        IT IS FURTHER ORDERED, that for all future Iles Formation wells to be drilled upon the application lands within drilling and spacing units (granted pursuant to this Application), the well shall be located downhole anywhere in the drilling and spacing unit but no closer than 100 feet from the boundaries of the unit without exception being granted by the Director of the Oil and Gas Conservation Commission.  It is provided however that in cases where the application lands abut or corner lands in respect of which the Commission has not at the time of drilling permit application granted the right to drill 10-acre density Iles Formation wells, the well shall be located downhole no closer than 400 feet from the boundary or boundaries of the drilling unit so abutting or cornering such lands without exception being granted by the Director of the Oil and Gas Conservation Commission. 

 

                        IT IS FURTHER ORDERED, that for all Williams Fork Formation and Iles Formation wells drilled upon the application lands shall be drilled 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 Colorado Oil and Gas Conservation Commission.

 

                        IT IS FURTHER ORDERED, that wells drilled to the Iles Formation shall only be drilled and completed in connection with drilling of wells to the Williams Fork 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 November, 2006, as of October 23, 2006.

 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

                                                                        By                                                                               

                                                                                                Patricia Beaver, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

November 8, 2006