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 CRAIG FIELD,
MOFFAT COUNTY, COLORADO |
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CAUSE NO. 199
ORDER NO. 199-6
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REPORT OF THE COMMISSION
The Commission heard this matter on May 29, 2012, in Suite 801, The Chancery
Building, 1120 Lincoln Street, Denver, Colorado, upon application for an
order to: 1) vacate Commission Order No. 474-5 and Order No. 474-6; 2) establish
an approximate 640-acre drilling and spacing unit for certain lands in Sections
5 and 8, Township 6 North, Range 91 West, 6th P.M.; 3) approve up to
two vertical, highly deviated or horizontal wells within the unit, with
bottom hole locations no closer than 660 feet to any outer boundary of the unit
with no setback required as to any interior quarter section line; and 4) pool all interests in the Application
Lands for the development and operation of the Niobrara Formation.
FINDINGS
The Commission finds as follows:
1.
Gulfport Energy Corporation
(“Gulfport” 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.
On February 23, 2009, the Commission
entered Order No. 474-5, which among other things, established a 320-acre
drilling and spacing unit consisting of the E½ of Section 5, Township 6 North,
Range 91 West, 6th P.M., for the production of gas and associated
hydrocarbons from the Niobrara Formation.
5.
On February 23, 2009, the Commission entered Order No. 474-6, which among
other things,
established a 320-acre drilling and spacing unit consisting of the N½ of Section
8, Township 6 North, Range 91 West, 6th P.M., for the production of
gas and associated hydrocarbons from the Niobrara Formation.
6.
On February 16, 2012 (AMENDED March 30, 2012),
Gulfport Energy Corporation
(“Gulfport” or “Applicant”), by its
attorneys, filed with the Commission pursuant to § 34-60-116 C.R.S., a
verified amended application (“Amended
Application”) for an order to: 1) vacate Commission Order No. 474-5 and Order
No. 474-6; 2) establish an
approximate 640-acre drilling and spacing unit for the below-described lands
(“Application Lands”); 3) approve up to two vertical, highly deviated or
horizontal wells within the unit, with bottom hole locations no closer
than 660 feet to any outer boundary of the unit with no setback required as to
any interior quarter section line; and 4)
pool all interests, including the currently-proposed well in the Application
Lands, for the development and operation of the Niobrara Formation, effective as
of the earlier of the date of the Application, or the date that any of the costs
specified in C.R.S. § 34-60-116(7)(b)(II) were first incurred for the drilling
of the well, and to subject any nonconsenting interests to the cost recovery
provisions of C.R.S. § 34-60-116(7):
Township 6 North, Range 91 West, 6th P.M.
Section 5:
S½
Section 8:
N½
7.
On March 27, 2012, Gulfport requested, and Commission Staff granted, a
continuance to the May 29, 2012 hearing.
8.
On May 15, 2012, Gulfport, by its attorneys, 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.
9.
Land testimony and exhibits submitted in support of the Application by
Candace Robinson, Senior Landman for Gulfport, showed Gulfport is a lessee of
mineral interests underlying the Application Lands, that all nonconsenting
interest owners were notified of the Application and received an Authority for
Expenditure (“AFE”) and an offer to participate in the Well. Further testimony concluded that the
AFE sent by the Applicant to the interest owners was a fair and reasonable
estimate of the costs of the proposed drilling operation and was received at
least 30 days prior to the May 29, 2012 hearing date.
10.
Geological testimony and exhibits submitted in support of the Application by
Steve D. Bridges, Consulting Geologist for Gulfport, showed a stratigraphic
cross section demonstrated the presence of a hydrocarbon reservoir across the
Application Lands. The testimony
concluded that the thickness of the Niobrara ranged from 200 to 270 feet under
the Application Lands. Testimony
concluded that vacating Commission Order Nos. 474-5 and 474-6, and establishing
a new approximate 640-acre unit would best develop the reservoir, prevent waste,
and protect correlative rights.
11.
Engineering testimony and exhibits submitted in support of the Application by
Steve Baldwin, Senior Reservoir Engineer for Gulfport, showed the estimated
drainage area for selected type wells ranged from 105 to 274-acres, depending on
the amount of natural fracture porosity.
Further testimony stated that a horizontal well was twice as likely to
produce an economically viable well as a traditional vertical well in the Craig
Dome Area.
12. 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.
13.
Gulfport
agreed to be bound by oral order of the Commission.
14.
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., the Commission should enter an order
to: 1) vacate Commission Order No. 474-5 and Order No. 474-6; 2) establish an
approximate 640-acre drilling and spacing unit for certain lands in Sections 5
and 8, Township 6 North, Range 91 West, 6th P.M.; 3) approve up to
two vertical, highly deviated or horizontal wells within the unit, with
bottom hole locations no closer than 660 feet to any outer boundary of the unit
with no setback required as to any interior quarter section line; and 4) pool all interests in the Application
Lands for the development and operation of the Niobrara Formation.
ORDER
NOW, THEREFORE IT IS ORDERED, that Commission Order No. 474-5 and Order No.
474-6, are hereby VACATED.
IT IS FURTHER ORDERED, that an approximate
640-acre drilling and spacing unit for the below-described lands, is hereby
established, and up to two vertical, highly deviated or horizontal wells within
the unit, are hereby approved, for the production of oil, gas, and associated
hydrocarbons from the Niobrara Formation, with bottom hole locations no
closer than 660 feet to any outer boundary of the unit with no setback required
as to any interior quarter section line:
Township 6 North, Range 91 West, 6th P.M.
Section 5:
S½
Section 8:
N½
IT IS FURTHER ORDERED, that:
1.
Pursuant to the provisions of §34-60-116, C.R.S., as amended, of the Oil
and Gas Conservation Act, all interests in the approximate 640-acre drilling and
spacing unit established for the below-described lands are hereby pooled, for
the development and operation of the Niobrara Formation, effective as of the
earlier of the date of the Application, or the date that the costs specified in
C.R.S. §34-60-116(7)(b)(II) are first incurred for the drilling of the well:
Township 6 North, Range 91 West, 6th P.M.
Section 5:
S½
Section 8:
N½
2.
The production obtained from the wellbore spacing unit shall be allocated
to each owner in the unit on the basis of the proportion that the number of
acres in such tract bears to the total number of mineral acres within the
wellbore spacing unit; each owner of an interest in the wellbore spacing unit
shall be entitled to receive its share of the production of the Well located on
the wellbore spacing unit applicable to its interest in the wellbore spacing
unit.
3.
The nonconsenting leased (working interest) owners must reimburse the
consenting working interest owners for their share of the costs and risks of
drilling and operating the Well (including penalties as provided by
§34-60-116(7)(b), C.R.S.) out of production from the wellbore spacing unit
representing the cost-bearing interests of the nonconsenting working interest
owners as provided by §34-60-116(7)(a), C.R.S.
4.
Any unleased owners are hereby deemed to have elected not to participate
and shall therefore be deemed to be nonconsenting as to the Well and be subject
to the penalties as provided for by §34-60-116 (7), C.R.S.
5.
Each nonconsenting unleased owner within the wellbore spacing unit shall
be treated as the owner of the landowner's royalty to the extent of 12.5% of its
record title interest, whatever that interest may be, until such time as the
consenting owners recover, only out of each nonconsenting owner's proportionate
87.5% share of production, the costs specified in §34-60-116(7)(b), C.R.S. as
amended. After recovery of such
costs, each unleased nonconsenting mineral owner shall then own its
proportionate 8/8ths share of the Well, surface facilities and production, and
then be liable for its proportionate share of further costs incurred in
connection with the Well as if it had originally agreed to the drilling.
6.
The operator of the well drilled on the above-described wellbore spacing
unit shall furnish the nonconsenting owners with a monthly statement of all
costs incurred, together with the quantity of oil and gas produced, and the
amount of proceeds realized from the sale of production during the preceding
month.
7.
Nothing in this order is intended to conflict with §34-60-116, C.R.S., as
amended. Any conflict that may arise
shall be resolved in favor of the statute.
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
4th
day of June, 2012, as of May 29, 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
June 4, 2012