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 LEFT HAND FIELD, KIOWA COUNTY, COLORADO

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CAUSE NO. 252

 

ORDER NO. 252-8

 

           

REPORT OF THE COMMISSION

 

This cause came on for hearing before the Commission at 9:00 a.m. on March 25, 2010, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to establish two approximate 80-acre drilling and spacing units for the N½ SW¼ and the S½ SW¼ of Section 21, 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 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.  The SW¼ of Section 21, Township 18 South, Range 47 West, 6th P.M. is subject to this Rule for the Marmaton Formation.

 

5.     On February 3, 2010, Bayhorse, by its attorney, filed with the Commission a verified application for an order to establish two approximate 80-acre drilling and spacing units for the N½ SW¼ and the S½ SW¼ of Section 21, Township 18 South, Range 47 West, 6th P.M., for the production of oil and associated hydrocarbons from the Marmaton Formation.

 

Bayhorse requests that, as to all future Marmaton Formation wells to be drilled upon the proposed drilling and spacing units, 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 Commission. 

 

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 Commission.

 

6.     On February 26, 2010, Bayhorse, by and through its attorney, filed with the Commission a written request to approve the application based on the merits of the verified amended application and the supporting exhibits.  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.  Additional 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 (“Kirby” #1 Well”) was drilled and completed in the Marmaton Formation in 1981 and that this well produced 43,756 bbls oil before being plugged in 1985.  Additional testimony showed that the Kirby #1 Well was the only Marmaton Formation producing well in the township until November 2009. 

 

10.   Further testimony and exhibits submitted in support of the application showed that in November 2009, Bayhorse drilled and completed the Trade Winds #1-28 Well as a successful producer in the Marmaton Formation.  Testimony showed that this well came on production at a rate of approximately 100 barrels (“bbls”) of oil per day.  Additional testimony also indicated that the Marmaton Formation was thinner at the Trade Winds #1-28 Well location, but appears to have better reservoir quality than the Kirby #1 Well. Further testimony indicated that the estimated ultimate recovery for the Trade Winds #1-28 Well is 42,000 bbls.

 

11.   Further testimony and exhibits submitted in support of the application showed that the estimated original oil-in-place for 80 acres is 764,197 bbls in the Kirby #1 Well and 317,415 bbls in the Trade Winds #1-28 Well.  Additional testimony showed that the volumetric estimates are based on a matrix density of 2.71 gm/cc, temperature of 125o F, 38o oil gravity, and an initial gas to oil ratio of 500 scf/bbl.   Further testimony also indicated the reservoir thickness of 18 feet results in an estimated ultimate recovery of 63,000 bbls, and an assumed recovery factor of 15%, the drainage area for the Kirby #1 Well calculates to be 44 acres.  However, the average reservoir thickness over the potential drainage area is most likely less than 18 feet which would result in a drainage area in excess of 44 acres.  Further testimony showed that the drainage area for the Trade Winds #1-28 Well is estimated at 71 acres.

 

12.   Further testimony and exhibits submitted in support of the application showed that based upon the estimated potential recoverable oil based on the average performance of the two area producing wells, the project will be economic.  

 

13.   The above-referenced testimony and exhibits showed that the granting of the application will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of oil/gas, and will not violate correlative rights.

 

14.  Bayhorse agreed to be bound by oral order of this Commission.

 

15.   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 two approximate 80-acre drilling and spacing units consisting of the N½ SW¼ and the S½ SW¼ of Section 21, 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 the following two approximate 80-acre drilling and spacing units are hereby established for the production of oil and associated hydrocarbons from the Marmaton Formation:

 

Township 18 South, Range 47 West, 6th P.M.

Section 21: N½ SW¼, S½ SW¼,

 

IT IS FURTHER ORDERED, that the permitted Marmaton Formation well drilled upon the application lands within each drilling and spacing unit 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 Commission.

 

IT IS FURTHER ORDERED, that except as previously authorized by order of the Commission, any well to be drilled under this order 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 Commission.

 

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 April, 2010, as of March 25, 2010.

           

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By____________________________________       

                                                                                    Carol Harmon, Secretary

 

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

April 24, 2010