BEFORE THE
OF THE STATE OF
IN
THE MATTER OF THE PROMULGATION ) CAUSE NOS. 232 & 407
AND
ESTABLISHMENT OF FIELD RULES TO )
GOVERN
OPERATIONS IN THE WATTENBERG ) ORDER NOS. 232-242 and
FIELD,
REPORT OF THE COMMISSION
This cause came on for
hearing before the Commission at 9:00 a.m. on
FINDINGS
The Commission finds as
follows:
1. EnCana Oil & Gas (USA) Inc. (“EnCana”),
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 August 21, 1979, the Commission issued
Order No. 232-20, which among other things, amended Order No. 232-1 to
establish additional 320-acre drilling and spacing units and allowed a second
well to be drilled for production of gas from the “J” Sand Formation, for
certain lands, including Section 18,
Township 1 North, Range 68 West, 6th P.M.
5. On December 19, 1983, the Commission issued
Order No. 407-1 (amended on March 29, 2000), which among other things,
established 80-acre drilling and spacing units for the production of oil and/or
gas and associated hydrocarbons from the Codell Formation underlying certain
lands, including Section 18, Township 1, North, Range 68 West, 6th P.M., with
the unit to be designated by the operator drilling the first well in the
quarter section. The permitted well
shall be located in the center of either 40-acre tract within the unit with a
tolerance of 200 feet in any direction. The
operator shall have the option to drill an additional well on the undrilled
40-acre tract in each 80-acre drilling and spacing unit.
6. On February 19, 1992, the Commission issued
Order No. 407-87 (amended August 20, 1993), which among other things,
established 80-acre drilling and spacing units for the production of oil and/or
gas from the Niobrara Formation underlying certain lands, including Section 18,
Township 1 North, Range 68 West, 6th P.M., with the permitted well to be located
in accordance with the provisions of Order No. 407-1.
7. On
8. Coincident with prior orders and the drilling
and spacing unit established for the “J” Sand Formation, EnCana wishes to designate
a 320-acre drilling and spacing unit consisting of the W½ of Section 18,
Township 1 North, Range 68 West, 6th P.M., in accordance with Rule 318A., for
production of gas and associated hydrocarbons from the Codell and Niobrara
Formations as well as the “J” Sand Formation.
On or around October 8, 2007, EnCana filed with the Commission Sundry
Notices, Form 4, establishing a 320-acre drilling and spacing unit for the
application lands, and for the proposed wells, for production of gas and
associated hydrocarbons from the Codell and Niobrara Formations as well as the
“J” Sand Formation.
9. On
10. Testimony and exhibits submitted in support
of the application showed that EnCana intends to drill Sosa11-18, Sosa 12-18,
Sosa 21-18 and Sosa 22-18 Wells from a surface location in the W½ of said
Section 18.
11. Testimony and exhibits submitted in support
of the application showed a list of all consenting and nonconsenting parties
within the drilling and spacing unit. Additional
testimony indicated that there are approximately 39.149 acres for which mineral
owners have elected not to sign a lease or to participate, such that 12.491% of
the 313.4 acres consisting of the W½ of Section 18 remain unleased.
12. Testimony and exhibits submitted in support
of the application showed that offers to lease or to participate were sent to
nonconsenting owners. Additional
testimony submitted showed that the offers and the Authorizations for
Expenditures were fair and reasonable, and similar to those prevailing in the
area. Further testimony submitted showed
the offers were sent via mail and all were received at least thirty (30) days
prior to the November 5, 2007 hearing date.
13. Testimony and exhibits submitted in support
of the application showed that EnCana has complied with the requirements of
Rule 530.a. and §34-60-116(7)(d), C.R.S.
14. EnCana Oil & Gas (USA) Inc. agreed to be
bound by oral order of the Commission.
15. On October 25, 2007, Patricia M. Hobbs Trust
and the Leonard R. Hobbs Trust, by their attorney, filed with the Commission a
letter of protest. Based on the issues raised
in the letter, telephone conversations between the COGCC Hearings Manager and
the
16. Based on the facts stated in the verified
application and based on the Hearing Officer review of the application under
Rule 511.b., the Commission should enter an order to pool all nonconsenting
interests in the 320-acre drilling and spacing unit consisting of W½ of Section
18, Township 1 North, Range 68 West, 6th P.M., for the development and
operation of the “J” Sand, Codell and Niobrara Formations.
ORDER
NOW, THEREFORE IT IS
ORDERED, that, 1. 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 of the nonconsenting interests in the 320-acre
drilling and spacing unit consisting of the W½ of Section 18, Township 1 North,
Range 68 West, 6th P.M. are hereby pooled for the development and operation of
the “J” Sand, Codell and Niobrara Formations.
2. The production obtained from the 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 each drilling unit; each owner of an interest in each drilling
unit shall be entitled to receive his/her share of the production of the well
located on each drilling unit applicable to his interest in each drilling unit.
3. Said owners are hereby deemed to have elected
not to participate and shall therefore be deemed to be nonconsenting as to the
well(s) and be subject to the penalties as provided for by §34-60-116 (7),
C.R.S.
4. Any nonconsenting 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 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, the nonconsenting
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.
5. The operator of any well drilled on the
above-described unit shall furnish all 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.
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, 2007, as of November 5, 2007.
OIL
AND GAS CONSERVATION COMMISSION
OF
THE STATE OF
By____________________________________
Patricia
C. Beaver, Secretary
Dated
at
November
9, 2007