BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE PROMULGATION AND ) CAUSE NOS. 1 and 232
ESTABLISHMENT OF FIELD RULES TO GOVERN )
OPERATIONS IN THE WATTENBERG GAS SPACED ) ORDER NOS. 1-91 and 232-232
AREA, WELD COUNTY, COLORADO )
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission at 8:30 a.m. on January 8, 2001, in Suite 801, the Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of hearing as required by law, on the application of Mountain Petroleum Corporation for an order establishing a 160-acre exploratory drilling unit for portions of Section 26, Township 1 North, Range 65 West, 6th P.M. for the production of oil, gas and associated hydrocarbons from the Cretaceous “D” Sand Formation, allowing a well to be drilled at an exception location and pooling all interests for the “D” Sand and “J” Sand Formations.
The Commission finds as follows:
1. Mountain Petroleum Corporation (“MPC”), 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.
4. In accordance with §34-60-116(2), C.R.S., the Commission is authorized to establish exploratory drilling units for the purpose of obtaining evidence as to the existence of a pool and the appropriate size and shape of the drilling unit to be applied thereto.
5. In Cause No. 232, the Commission established 320-acre drilling and spacing units for the production of gas and associated hydrocarbons from the “J” Sand in the Wattenberg Field with one well allowed for each unit to be located in the NE¼ and the SW¼ and no closer than 990 feet to the boundaries of the quarter section. On August 21, 1979, the Commission issued Order No. 232-20, which allowed a second well to be drilled on each 320-acre unit. Section 26, Township 1 North, Range 65 West, 6th P.M. is included in the area established in Cause No. 232.
6. On November 20, 2000, MPC, by its attorney, filed with the Commission a verified application to establish a 160-acre exploratory drilling unit consisting of the E½ SW¼ and the W½ SE¼ of Section 26, Township 1 North, Range 65 West, 6th P.M. for the production of oil, gas and associated hydrocarbons from the Cretaceous “D” Sand Formation, allowing up to four (4) wells to be drilled on the proposed unit, with the wells located no closer than 460 feet from the unit boundary. For purposes of this Application, the “D” Sand Formation is defined as the stratigraphic equivalent of the interval from 7848 feet to 7902 feet (top of “J” Silt) as shown on the log for the Jordan 34-7 Well, located in Section 34, Township 1 North, Range 65 West, 6th P.M. Additionally, MPC requested an exception to Rule 318A. be granted to allow a test well to be drilled in the SW¼ NW¼ SE¼ of Section 26, Township 1 North, Range 65 West, 6th P.M. for production of the “D” Sand and the “J” Sand Formations. Further, MPC requested all interests be pooled in the proposed 160-acre exploratory drilling unit for the development and operation of the “D” Sand Formation and in the 320-acre drilling and spacing unit consisting of the S½ of Section 26 for the development and operation of the “J” Sand Formation.
7. Testimony and exhibits presented at the administrative hearing showed the owners and lease holders of mineral interests in the S½ of Section 26, Township 1 North, Range 65 West, 6th P.M.
8. Testimony and exhibits presented at the administrative hearing showed the narrow “D” Sand channel in the area, as interpreted from seismic data and described why an exception to the permittable well location set forth in Rule 318A. is necessary to develop the narrow “D” Sand channel found in Section 26. Establishing a 160-acre exploratory unit crossing the center section line will allow equitable recovery from the “D” Sand at the exception location. In addition, the ability to drill up to four wells on the exploratory unit is consistent with the well density provisions of Rule 318A.
9. Testimony and exhibits presented at the administrative hearing showed that reasonable offers were made to the unleased mineral owners to lease their minerals or to allow them to participate in the well. The well will be drilled to the “J” Sand Formation with the “D” Sand Formation as the primary objective for production, however, pooling of both formations is requested.
10. At the time of the administrative hearing, MPC agreed to be bound by oral order of the Commission.
11. Based on the facts stated in the verified application, having received no protests and having been heard by the Hearing Officer who recommends approval, the Commission should enter an order to establish a 160-acre exploratory drilling unit consisting of the E½ SW¼ and the W½ SE¼ of Section 26, Township 1 North, Range 65 West, 6th P.M. for the production of oil, gas and associated hydrocarbons from the Cretaceous “D” Sand Formation, allowing up to four (4) wells to be drilled on the proposed unit, with the wells located no closer than 460 feet from the unit boundary. Additionally, an exception to Rule 318A. should be granted to allow a test well to be drilled in the SW¼ NW¼ SE¼ of Section 26, Township 1 North, Range 65 West, 6th P.M. for production of the “D” Sand and the “J” Sand Formations. Further, all interests should be pooled in the proposed 160-acre exploratory drilling unit for the development and operation of the “D” Sand Formation and in the 320-acre drilling and spacing unit consisting of the S½ of Section 26 for the development and operation of the “J” Sand Formation.
NOW, THEREFORE IT IS ORDERED, that a 160-acre exploratory drilling unit is hereby established consisting of the E½ SW¼ and the W½ SE¼ of Section 26, Township 1 North, Range 65 West, 6th P.M. for the production of oil, gas and associated hydrocarbons from the Cretaceous “D” Sand Formation.
IT IS FURTHER ORDERED, that an exception to Rule 318A. is hereby granted to allow a test well to be drilled in the SW¼ NW¼ SE¼ of Section 26, Township 1 North, Range 65 West, 6th P.M. for production of the “D” Sand and the “J” Sand Formations.
IT IS FURTHER ORDERED, that in accordance with Rule 318A., up to four (4) wells may be drilled on the above-established unit, with the wells located no closer than 460 feet from the unit boundary.
IT IS FURTHER ORDERED, that, pursuant to the provisions of §34-60-116, C.R.S. as amended, of the Oil and Gas Conservation Act of the State of Colorado, all interests are hereby pooled in the proposed 160-acre exploratory drilling unit for the development and operation of the “D” Sand Formation and in the 320-acre drilling and spacing unit consisting of the S½ of Section 26 for the development and operation of the “J” Sand Formation.
The production obtained from said drilling 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 said drilling unit; each owner of an interest in said drilling unit shall be entitled to receive his/her share of the production of the well(s) located on said drilling unit applicable to his/her interest in said drilling unit.
Said owner(s) are hereby deemed to have elected not to participate and shall therefore be deemed to be non-consenting as to the well(s) and to be subject to the penalties as provided for by §34-60-116(7).
Any non-consenting unleased mineral owner within the spacing unit shall be treated as the owner of the landowner’s royalty to the extent of 12.5% of his/her record title interest, whatever that interest may be, until such time as the consenting owner recovers, only out of the non-consenting 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, the non-consenting mineral owner shall then own his/her proportionate 8/8ths share of the well, surface facilities and production, and then be liable for his/her proportionate share of further costs incurred in connection with the well as if he/she had originally agreed to the drilling.
The operator of any well drilled on the above-described unit shall furnish all non-consenting 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.
Mountain Petroleum Corporation shall be designated as the operator for the 160-acre drilling and spacing unit consisting of the E½ SW¼ and the W½ SE¼ of Section 26, Township 1 North, Range 65 West, 6th P.M. for the production of oil, gas and associated hydrocarbons from the Cretaceous “D” Sand Formation, and shall be designated as operator for the 320-acre drilling and spacing unit consisting of the S½ of said Section 26 for the production of gas and associated hydrocarbons from the “J” Sand 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.
ENTERED this day of January 2001, as of January 8, 2001.
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
January 11, 2001