BEFORE THE OIL AND GAS CONSERVATION
COMMISSION
OF THE STATE OF COLORADO
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IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE LEFT HAND FIELD, KIOWA COUNTY, COLORADO |
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CAUSE NO. 252
ORDER NO. 252-6
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REPORT OF THE COMMISSION
This cause came on for hearing before the Commission at 9:00 a.m. on September 25, 2009, in the South Conference Room, Pagosa Springs Community Center, Pagosa Springs, Colorado, for an order to establish ten approximate 80-acre drilling and spacing units for certain lands located in Sections 27, 28 and 34, Township 18 South, Range 47 West, 6th P.M., for the production of oil and associated hydrocarbons from the Marmaton Formation.
FINDINGS
The Commission finds as follows:
1. Bayhorse Petroleum, LLC (“Bayhorse”), 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 Oil and Gas Conservation Commission requires that wells drilled in excess of 2,500 feet in depth be located not less than 600 feet from any lease line, and located 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. Sections 27, 28 and 34, Township 18 South, Range 47 West, 6th P.M. are subject to this Rule for the Marmaton Formation.
5. On August 3, 2009, Bayhorse, by its attorneys, filed with the Commission a verified application for an order to establish ten approximate 80-acre drilling and spacing units for the below-listed lands, for the production of oil and associated hydrocarbons from the Marmaton Formation:
Township 18 South, Range 47 West, 6th P.M.
Section 27: N½ SW¼
S½ SW¼
Section 28: N½ NW¼
S½ NW¼
W½ NE¼
E½ NE¼
N/½ SE¼
S½ SE¼
Section 34: N½ NW¼
S½ NW¼
Bayhorse requests that, as to all future Marmaton Formation wells to be drilled upon the application lands within each drilling and spacing unit, the permitted well should be located downhole anywhere in the drilling and spacing unit but no closer than 600 feet from the boundaries of the unit without exception being granted by the Director of the Oil and Gas Conservation Commission. It is further provided that, in cases where the application lands abut or corner lands in which the Commission has not at the time of drilling permit application granted the right to drill 80-acre density Marmaton Formation wells, the permitted well should be located downhole no closer than 1120 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, except as previously authorized by order of the Commission, wells to be drilled under this application will be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section (or lots or parcels approximately equivalent thereto) unless exception is granted by the Director of the Colorado Oil and Gas Conservation Commission.
6. On September 10, 2009, Bayhorse, 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 as is provided for by Rule 511. Sworn written testimony and exhibits were submitted in support of the application.
7. Testimony and exhibits submitted in support of the application showed that Bayhorse is a leasehold owner of mineral interests underlying the application lands.
8. Testimony and exhibits submitted in support of the application showed that the geologic model of the application lands indicates that the Marmaton Formation has an 18 to 20 foot maximum porosity thickness. Further testimony indicated that the Marmaton Formation underlying the application lands is oriented such that the pay zone for the reservoir is contained therein.
9. Testimony and exhibits submitted in support of the application showed that the Curtis & Rex Kirby #1 Well (API No. 05-061-06308, the “Well”), located in the NW¼ SW¼ of Section 21, Township 18 South, Range 47 West, 6th P.M. on adjacent lands north of the application lands, was completed in the Marmaton Formation in August 1981 and produced 43,756 barrels of oil before being plugged in 1987. Further testimony showed that, based on log analysis of the Well, the estimated original oil-in-place (“OOIP”) for 80 acres is 764,197 barrels of oil for the Marmaton Formation underlying the application lands. Additional testimony indicated that, based on a reservoir thickness of 18 feet, an estimated primary recovery factor of 15% OOIP, and an estimated ultimate recovery of 63,000 barrels of oil, the drainage area calculates to be approximately 44 acres, which supports the request for 80-acre spacing units on the assertion that said units are not smaller than the maximum area that can be efficiently and economically drained by one well. Testimony showed that economic analysis indicated that payout is expected to occur in less than one year with a return on investment greater than 3 to 1 and a rate of return in excess of 30%.
10. The above-referenced testimony and exhibits showed that the proposed spacing order will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of oil, and will not violate correlative rights.
11. Bayhorse Petroleum, LLC agreed to be bound by oral order of the Commission.
12. 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 establish ten approximate 80-acre drilling and spacing units for certain lands located in Sections 27, 28 and 34, Township 18 South, Range 47 West, 6th P.M., for the production of oil and associated hydrocarbons from the Marmaton Formation.
ORDER
NOW, THEREFORE IT IS ORDERED, that ten approximate 80-acre drilling and spacing units are hereby established for the below-listed lands, for the production of oil and associated hydrocarbons from the Marmaton Formation:
Township 18 South, Range 47 West, 6th P.M.
Section 27: N½ SW¼
S½ SW¼
Section 28: N½ NW¼
S½ NW¼
W½ NE¼
E½ NE¼
N/½ SE¼
S½ SE¼
Section 34: N½ NW¼
S½ NW¼
IT IS FURTHER ORDERED, that all future Marmaton Formation wells to be drilled upon the application lands within each drilling and spacing unit, the permitted well shall be located downhole anywhere in the drilling and spacing unit but no closer than 600 feet from the boundaries of the unit without exception being granted by the Director of the Oil and Gas Conservation Commission. It is further provided that, in cases where the application lands abut or corner lands in which the Commission has not at the time of drilling permit application granted the right to drill 80-acre density Marmaton Formation wells, the permitted well shall be located downhole no closer than 1120 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, except as previously authorized by order of the Commission, wells to be drilled under this application shall be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section (or lots or parcels approximately equivalent thereto) unless exception is granted by the Director of the Colorado Oil and Gas Conservation Commission.
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 October, 2009, as of September 25, 2009.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert A. Willis, Acting Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
October 5, 2009