2-28

BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE INVESTIGATION TO TAKE MEASURES TO PREVENT WASTE OF OIL AND GAS IN THE RANGELY FIELD, IN THE STATE OF COLORADO

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CAUSE NO. 2

ORDER NO. 2-28

REPORT OF THE COMMISSION

The Commission feels that the people of the State of Colorado are entitled to have their natural resources protected against waste. The Commission further believes that, within the limitations of its statutory power, it is obligated to do its utmost to protect those resources. To that end, the Commission is under statutory direction to prohibit the escaping, blowing or releasing, directly or indirectly, of gas in an excessive or unreasonable amount from wells producing oil and gas. This duty of the Commission was clearly and unmistakably emphasized by the Colorado Supreme Court.

On November 22, 1955, the Commission issued its Order No. 2-27, by virtue of which all field rules and regulations theretofore issued for the operation of the Rangely oil field were rescinded except Rules 1 and 2 of Order No. 2-8, and Rule 6 of (Order No. 2-8 as amended by Order No. 2-18). Thereafter, no other affirmative orders were in effect at Rangely.

At that time, it was the unanimous opinion of the Commission and the operators that the most efficient and effective method for operating the Rangely Field would be under a field wide unit agreement, but as stated then, in the absence of any type of it operation it was important to all operators and other interested parties, and to the State of Colorado, that the field be operated so as to conserve valuable oil and gas deposits; minimize waste of oil and gas; protest the reservoir energy; provide for disposition of excess gas produced; protect correlative rights of operators and interested parties, and generally provide for an orderly and proper operation of so large and important a deposit of oil and gas.

Specific reference is made to Order No. 2-27 "Report of the Commission", which summarized the position of the Commission at that time,

Since November 22, 1955, a period of approximately seven months, the Rangely Field has been operated without an affirmative order from the Commission. During this period, the daily average production of oil and gas, and the gas flare, have increased a marked degree, as shown by the following tabulation:

	Nov. 1955	May 1956	Increase

Oil Production (Bbls)	65,510	81,477	15,967
Gas Production (Mcf)	114,895	152,978	38,083
Gas Flare (Mcf)	5,911	44,863	38,952
GOR (Cu. ft./bbl)	1,754	1,878	124

This indicates that an increase of 15,967 barrels of oil production per day required an increase of 38,083 Mcf in gas production, representing an increase In gas flare of 38,952 Mcf per day.

The following is a brief summary of the number of wells with a gas-oil ratio of 5000 cubic feet per barrel of oil, up to and including wells with a gas-oil ratio of 20,000 cubic feet and above, showing a marked increase in the daily average production of such wells as indicated by the production test records of November, 1955, and May, 1956.

	No. of Wells	Oil Produced Barrels	Gas Produced Mcf	GOR

November, 1955	28	3,655	32,227	8,817
May, 1956	37	5,076	45,006	8,866
Increase	9	1,421	12,779	8,993

The above tabulation indicates an ever-increasing number of wells producing at a ratio of 5000 cubic feet per barrel of oil and upwards, which undoubtedly will continue unless some regulations are issued by the Commission. During the period of about seven months, there was an increase of nine (9) such wells which required additional production of 12,779,000 cubic feet of gas to produce only 1421 barrels of oil, representing a gas-oil ratio of 8993 cubic feet per barrel of oil produced. During May, 1956, it required 29.42% of the total gas produced to produce 6.23% of the oil produced from only 37 wells, or 8.19% of the total producing oil wells of the field. Even taking into consideration the fact that some of this gas production may have been reinjected into the Weber horizon, it is fair to assume that the removal of such a quantity of gas from the Weber reservoir to produce such a small quantity of oil is wasteful, unduly reduces reservoir pressure, and violates correlative rights of some of the royalty and operating interests in the Weber reservoir.

The above tabulations indicate that in the absence of the unit operation or an effective control order for the Rangely field, the operators, since November 1955, have been unable to operate the field without waste or abuse of correlative rights, despite Paragraph 100-6-16, "Agreements for Development" of the Oil and Gas Conservation Act, under which the operators may voluntarily agree on a plan of gas injection which could control gas production and flare.

A brief study of Rangely production discloses that during the four months period from February 1 to June 1, 1946, the average bottom hole pressure declined 55 psi during the production of 2,102,234 barrels of oil produced, which represents 38,222 barrels of oil for each pound of pressure decline. At that time, it was estimated 310,000,000 barrels of oil would be produced from the Weber reservoir.

More recent figures covering a period of April 1953 to June 1954 show that 571,307 barrels of oil were produced during said period for each one-pound-pressure decline.

In June 1955, the report of the Rangely Engineering Committee showed that 101,701 barrels of oil had been produced per pound loss in pressure from the original bottom hole pressure. This was the result after the injection program had been in effect since September 15, 1953.

The above indicates impressive results from gas injection and other conservation practices. A revision of the estimated recoverable oil from the Weber sand reservoir now indicates approximately 400,000,000 barrels of recoverable oil, a gain of 90,000,000 barrels over the estimate made in 1946.

It should be noted here, however, that on May 16, 1955, the Supreme Court invalidated Rule 3(b) of the Commission's Order No. 2-8, which put an end to the Commissions power to require injection of gas into the Weber reservoir.

For some considerable time there has been a gradual increase in gas and oil production, due to the field being operated without any form of control. It is apparent from the above tabulations and from the more detailed records of the Commission that there is waste of oil and gas; dissipation of reservoir energy by virtue of the increase in production of gas; increase in gas-oil ratio, and also, that by virtue of a non-regulated or controlled operation, correlative rights are being abused, due to non-uniform, disproportionate, unratable, or excessive withdrawals of oil and gas from the Weber reservoir.

The Commission appreciates and realizes that in practically all oil fields there is bound to be an increase in gas-oil ratio, especially in a reservoir where large quantities of gas have been injected. The Commission has been informed that a pipeline is near completion which will take initially about 20,000,000 cubic feet of gas. It was further stated at the hearing that about twelve (12) months after the pipeline connects to the Rangely Field, an additional 20,000,000 cubic feet of gas may be taken daily. This fact makes the reasons for limiting the flare of natural gas even more important. It has been indicated by some operators that the presence of gas in the reservoir may increase the effectiveness of water flood. The time is approaching when water injection should be considered, although this may not be possible until the operators agree on a field-wide unit program.

At the hearing on June 25, 1956, testimony indicated that the operators were desirous of having some decision reached by the Commission as to a proper order for the operation of the Rangely Field. It is also evident from the records of the Commission that, in the interest of conservation and in compliance with the statute under which the Commission functions, an order should be issued promptly on a basis which will minimize the waste of oil and gas; protect the reservoir energy; protect correlative rights of all parties, and to generally provide rules and regulations for the orderly and proper operation of the field.

Although the Commission does not have statutory authority to require unitization of the Rangely Field, it is the hope of the Commission that this order will be the first step in a field-wide unit, which all concede should greatly increase ultimate recovery of oil and gas from the reservoir.

FINDINGS

The Commission finds as follows:

1. That due notice of the time, place and purpose of the hearing has been given in all respects as required by law.

2. That 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.

3. That the "Report of the Commission" contained herein is composed of factual data which should be, and is hereby made a part of these Findings.

4. That evidence, exhibits, representations and recommendations made at the June 25, 1956 hearing indicate that wells producing oil and gas from the Weber reservoir should be produced reader a controlled rate in order to prevent waste, and that a limitation of Three Hundred (300) barrels of oil, and a limiting gas-oil ratio of Six Hundred (600) cubic feet of gas per barrel of oil produced, and a net gas depletion of One Hundred Eighty Thousand (180,000) cubic feet per well per day is a reasonable limitation, and that such a limitation is necessary to prevent unreasonable reduction of reservoir pressure, inefficient, excessive and improper dissipation of reservoir energy, unreasonable diminution of the quantity of oil that might ultimately be produced, unratable or excessive withdrawal of oil or gas, and to prevent reasonably avoidable drainage between tracts of land resulting in one or more operators or owners producing more than his just and equitable share of oil or gas.

5. That the injection of gas into the Weber reservoir has proved to be a highly beneficial practice for increasing the ultimate recovery of oil from the Weber reservoir, and voluntary gas injection should be permitted and encouraged.

6. That during the month of May 1956, five (5) wells in the field were producing at a gas-oil ratio in excess of 20,000 cubic feet of gas per barrel of oil. These wells produced a total of approximately 7,031,000 cubic feet of gas, and 223 barrels of oil daily. The production of oil from wells at this ratio is an excessive use of reservoir energy, and should be prohibited.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the following rules and regulations be, and the same are hereby adopted for the Weber reservoir of the Rangely field, in Rio Blanco County, Colorado.

Rule 1. All field rules and regulations heretofore issued for the operation of the Rangely Oil field are hereby rescinded, except Rule 1 of Order No. 2 27 and no other affirmative rules, regulations or orders shall remain in effect.

Rule 2.

(a) The maximum daily allowable production of oil for any one well producing from the Weber reservoir shall be Three Hundred (300) barrels, and the limiting gas-oil ratio for all producing wells shall be Six Hundred (600) cubic feet of gas per barrel of oil produced. The daily oil allowable for any one well shall be the maximum amount of oil it is capable of producing, as determined by tests required by Rule 4 hereof, not to exceed Three Hundred (300) barrels, except as adjusted by Rule 3 hereof; provided, however, that wells which have a producing gas-oil ratio in excess of Six Hundred (600) cubic feet of gas per barrel of oil shall be granted an oil allowable as determined by the following formula not to exceed the volume of oil such well is capable of producing, as determined by tests required in Rule 4 hereof:

Daily Oil Allowable =	(180,000 cubic feet of gas)
	Gas-oil ratio of well

(b) In order that the operators may produce any one lease in the most efficient manner possible, the oil allowable of any one well or combination of wells on any given lease may be transferred and produced from any other well or combination of wells on the same lease, provided that such a transfer will result in the production of less gas, and provided further that such a transfer shall be reported to the Commission as a supplement to monthly production reports required herein; provided, however, that in no event shall a well with a gas-oil ratio of 20,000 cubic feet of gas per barrel of oil or over be allowed to produce.

(c) Underproduction and overproduction of oil shall be adjusted on a quarterly basis. A quarter as used herein shall mean any three (3) consecutive months of the year, beginning with the months of January, April, July and October. The quarterly oil allowable for every producing well shall be determined by multiplying the daily oil allowable by the number of days in the respective quarter. Underproduction of oil for any one quarter may be made up only during the quarter immediately following, and any overproduction of oil obtained during any one quarter shall be made up during the quarter immediately following; and any overproduction of oil in excess of five percent (5%) of the total quarterly well allowable shall be considered a violation of this order, unless a valid reason is given.

Rule 3. Authorization to inject gas into the Weber reservoir is hereby granted.

(a) All wells approved for injection by this rule and used for voluntary gas injection into the Weber reservoir shall be credited with a daily oil allowable of Three Hundred (300) barrels, which oil allowable may be transferred and produced by the operator in whole or in part to any other well or wells of said operator in the same "injection area", as defined in Rule 3(b) hereof.

(b) In the event Weber gas injection operations are conducted, certain controls over such operations must be exercised to prevent waste and abuse of correlative rights of all parties. For this purpose, certain wells as gas injection wells and respective "injection areas" are hereby established, defined and approved; further, the volume of gas voluntarily injected into a given gas injection well by an operator shall be governed by the following provisions:

(1) A volume of gas, not to exceed that volume produced from or attributable to that part of the Calco Fee lands located west of the line A-A’ shown on Exhibit 1 attached hereto, and the Gray "A" lease, Gray "B" lease, the Neal lease, the Raven "A" lease, and the Raven "B" lease, may be injected by The California Company into the Fee #65 well, the Fee #4 well, and the Gray "B" #10 well; the Gray "B" #10 well may inject a volume of gas up to but not in excess of fifty percent (50%) of such gas injected; and the remainder of such gas injected shall be divided into the Fee #65 well and the Fee #4 well, as good operating practices may from time to time require.

(2) A volume of gas not to exceed that volume produced from or attributable to the Emerald Oil Company lease may be injected by The California Company into the Emerald #34 well and the Emerald #6 well, such gas injected to be divided into each such well as good operating practices may from time to time require.

(3) A volume of gas not to exceed that volume produced from or attributable to the A. G. McLaughlin Consolidated lease may be injected by The California Company into the McLaughlin #38 well.

(4) A volume of gas not to exceed that volume produced from or attributable to that part of the Calco Fee lands located east of the line A-A’ shown on Exhibit No. 1 attached hereto, and the S. W. McLaughlin lease may be injected by The California Company into the Fee #54 well.

(5) A volume of gas not to exceed that volume produced from or attributable to all Phillips operated leases may be injected by the Phillips Petroleum Company into the Levison #16 well and the Levison #12 well, such gas injected to be divided into each such well as good operating practices may from time to time require.

(6) A volume of gas not to exceed that volume produced from or attributable to the Sharples operated leases may be injected by the Sharples Oil Corporation into the McLaughlin #5-33 well.

(7) A volume of gas not to exceed that volume produced from or attributable to all Stanolind operated leases located west of the line A-A’ as shown on Exhibit 1 attached hereto, may be injected by the Stanolind Oil and Gas Company into the L.N. Hagood #6 well.

(8) A volume of gas not to exceed that volume produced from or attributable to all Stanolind operated leases located east of the line A-A’ as shown on Exhibit 1 attached hereto, may be injected by the Stanolind Oil and Gas Company into the F. V. Larson "B" #11 well and the E. Rector #4 well, such gas injected to be divided between such wells as nearly equally as possible.

(9) A volume of gas not to exceed that volume produced from or attributable to all Texas-Union Pacific Fee lands located in Sections Sixteen (16), Seventeen (17), Twenty (20), Twenty-one (21), Twenty-two (22), Twenty-eight (28), Twenty-nine (29), Thirty-one (31) and Thirty-two (32), of Township Two (2) North, Range One Hundred Two (102) West of the Sixth (6th) P.M.; and Section Five (5), Township One (1) North, Range One Hundred Two (102) West of the Sixth (6th) P.M., may be injected by The Texas Company into the U.P. #57-21 well, U.P. #56-21 well, U.P. #34-31 well, and U.P. #67-32 well, such gas injected to be divided as nearly equally as possible between (a) U.P. #57-21 and U.P. #56-21; and (b) U.P. #34-31 and U.P. #67-32. The gas injected to be divided between wells U.P. #57-21 and U.P. #56-21, as good operating practices may from-time to time require. Similarly, the gas injected shall be divided between wells U.P. #34-31 and U.P. #67-32, as good operating practices may from time to time require.

(10) A volume of gas not to exceed that volume produced from or attributable to all of the Texas-U.P. Carney and Carney Unit lands, and the Texas-U.P. Fee lands located in Sections Twenty-seven (27), Thirty-four (34) and Thirty-five (35), of Township Two (2) North, Range One Hundred Two (102) West, may be injected by The Texas Company into the U.P. #32-27 well and the Carney #12-5 well, such gas injected to be divided as good operating practices may from time to time require.

(c) Gas injected voluntarily into each injection well shall at all times be injected only in accordance with sound engineering practices.

(1) Commencing with the effective date of this Order, no gas shall be injected into the Weber reservoir in an injection well or in a manner other than that herein approved or provided, except on approval of the Commission after notice and hearing.

(2) When gas is injected into the Weber reservoir by any operator, the volume of gas injected may be credited to any well or combination of wells operated by such operator. Where injected gas credited to a well, the daily gas limit of 180,000 cubic feet shall be increased by the volume of injected gas so credited. The daily oil allowable of such well shall then be determined and assigned by dividing its daily gas limit after adjustment for injection credit, by its producing gas-oil ratio in cubic feet per barrel of oil produced, in accordance with the following formula:

Adjusted Oil Allowable =	(180,000 Ɨ cubic feet of injected gas)
	Gas-oil ratio of well

provided that in no event shall the daily adjusted oil allowable determined by the above formula for any producing well be permitted to exceed Three Hundred (300) barrels, except as provided in Rule 3(a) hereof.

(3) To receive credit against produced gas, for any gas that is returned to the Weber reservoir, each such operator shall furnish the Commission each month on such a form as may be prescribed or recognized by the Commission therefore, the total monthly amount of gas injected into the Weber reservoir by injection areas, and an accounting of credit gas.

Rule 4.

(a) All operators and owners of wells producing from the Weber sand formation of the Rangely field shall make a gas-oil-ratio test of each of his producing wells during every quarter, and such tests shall be taken during the second month of each the results of which such tests shall be reported to the Commission on a form provided by the Commission entitled "Gas-Oil-Ratio Report", on or before the twentieth (20th) day of the last month of every quarter; such tests shall be the basis for calculating the volume of oil allowed to be produced for the following quarter, except as provided in Rule 3 hereof; and subject well shall be produced at its normal stabilized rate of production or a period of Ninety-six (96) consecutive hours; and the gas-oil ratio shall be computed on the. basis of the measurement of oil and gas during the last Twenty-four (24) hours of said period; and a schedule shall be submitted to the Commission and to offset operators prior to testing, showing the wells and respective dates of tests; and the volume of gas measured shall be reported in units of cubic feet at a base pressure of 15.025 psia, and a base temperature of 60° Fahrenheit.

(b) Any operator may apply for an adjusted allowable upon submission or test authorized by the Commission.

(d) A well testing report prepared by the Rangely Engineering Committee will satisfy the requirement of reporting results of gas-oil-ratio tests, provided that all testing detail required by the Commission is shown and figures submitted for an operator are verified by a written statement by the respective operator.

(e) Results of gas-oil-ratio tests taken during the month of May 1956, and on file with the Commission, shall be the basis for establishing oil allowable for the quarter beginning July 1, 1956. The oil allowable for those wells not tested during the month of May 1956, shall be based on the most recent monthly gas-oil-ratio test for such wells now on rile with the Commission.

Rule 5. Oil, gas and water production by wells, and the disposition of produced gas by batteries shall be reported by the operator of each lease by the twenty-fifth (25th) day of a given month, for the preceding month. Such well production may be estimated by breaking down actual battery production on the most accurate basis available. The monthly production report now prepared by the Rangely Engineering Committee will satisfy this requirement, provided that this report is supplemented by one showing the disposition of gas for each battery and lease, and the Rangely Engineering Committee figures submitted for an operator are verified by letter by the respective operator.

IT IS FURTHER ORDERED, that the rules and regulations hereinabove promulgated are subject to alteration and modification as may be required, and the Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above rules and regulations. Furthermore, any operator may at any time apply to the Commission for modification of this Order or any rule or regulation herein contained.

The Commission, on its own motion, hereby sets a hearing on September 25, 1956, (proper notice to be issued later), to review the operation of the Rangely Field, including the flaring of gas and any other form of waste, if any, as defined by the Oil and Gas Conservation Act, and will consider whether or not it will be necessary to modify this Order to establish a "gas flare" limit, or other provisions necessary to govern the operation of the Weber reservoir of the Rangely Field without waste.

IT IS FURTHER ORDERED, that all rules and regulations contained in any Statewide order in effects or that may be promulgated by this Commission, which are not consistent with the foregoing rules and regulations, are hereby adopted and will apply by reference.

IT IS FURTHER ORDERED, that this Order shall become effective the 23rd day of July, 1956.

ORDERED this 17th day of July, 1956, by The Oil and Gas Conservation Commission of the State of Colorado.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Annabel Hogsett, Secretary

BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE INVESTIGATION TO TAKE MEASURES TO PREVENT WASTE OF OIL AND GAS IN THE RANGELY FIELD, IN THE STATE OF COLORADO

)

CAUSE NO. 2

SUPPLEMENT TO

ORDER NO. 2-28

Permission is hereby granted to the Stanolind Oil and Gas Company to transfer daily oil allowables of certain injection wells as follows:

1. Three Hundred (300) barrels of oil per day allowable for the F. V. Larson "B" #11 injection well may be transferred to the M. B. Larson Leases "A" and "B"; provided, however, that not more than One Hundred Twenty-five (125) barrels of oil per day may be transferred to any one (1) well on said leases,

2. Three Hundred (300) barrels of oil per day allowable for the Rector #4 injection well may be transferred to the M. C. Hagood "A" Lease; provided, however, that not more than Seventy-five (75) barrels of oil per day may be transferred to any one (1) well on said lease.

This permission is granted with the understanding that it may be altered, modified or changed at any time.

Dated at Denver, Colorado, on the 10th day of August, 1956.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Annabel Hogsett, Secretary