BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE PROMULGATION AND ) CAUSE NO. 300
ESTABLISHMENT OF FIELD RULES TO GOVERN )
OPERATIONS IN THE BEECHER ISLAND FIELD, ) ORDER NO. 300-9
YUMA COUNTY, COLORADO ) CORRECTED
This cause came on for hearing before the Commission at 10:00 a.m. on March 15, 2004 in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado on the verified application of Mountain Petroleum Corporation for an order to allow up to four (4) wells to be drilled within each 160-acre drilling and spacing unit for certain lands for the production of gas and associated hydrocarbons from the Niobrara Formation, with the permitted well to be located no closer than 560 feet to the outer boundary of the unit and that the Director be allowed to grant an exception to the permitted well location without prior notice or hearing upon an adequate showing by the operator that topography makes it unreasonable to drill the second well within a 560-foot setback, but no closer than 380 feet from the boundary of the drilling and spacing unit, and requests for any other exception location may be granted in accordance with Rule 318.
The Commission finds as follows:
1. Mountain Petroleum Corporation (“Mountain Petroleum”), 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.
5. On November 4, 1996, the Commission issued Order No. 300-7, which allowed an additional well to be drilled on each 160-acre drilling and spacing unit in the Beecher Island Field, at the option of the operator, for the production of gas and associated hydrocarbons from the Niobrara Formation, with the subsequent permitted well to be located no closer than 560 feet from the outer boundaries of said 160-acre drilling and spacing unit. The order also allowed the Director to grant exceptions to the permitted well locations without prior notice or hearing upon an adequate showing by the operator that topography makes it unreasonable to drill a second well within the 560 feet setback, but no closer than 380 feet from the boundary of the drilling and spacing unit and requests for any other exception location may be granted in accordance with Rule 318.
6. On January 26, 2004, Mountain Petroleum Corporation (“Mountain Petroleum”), by its attorney, filed with the Commission a verified application for an order to allow up to four (4) wells to be drilled within each 160-acre drilling and spacing unit for the below-listed lands for the production of gas and associated hydrocarbons from the Niobrara Formation, with the permitted well to be located no closer than 560 feet to the outer boundary of the unit and that the Director be allowed to grant an exception to the permitted well location without prior notice or hearing upon an adequate showing by the operator that topography makes it unreasonable to drill the second well within a 560-foot setback, but no closer than 380 feet from the boundary of the drilling and spacing unit, and requests for any other exception location may be granted in accordance with Rule 318.
Township 1 South, Range 43 West, 6th P.M.
Sections 32 and 33: S½
Township 2 South, Range 43 West, 6th P.M.
Section 2: W½
Sections 3 through 5: All
Section 11: W½
Section 14: All
Section 16: All
Sections 19 through 21: All
Section 23: All
Section 26: All
Sections 28 through 31: All
Section 34: All
Township 2 South, Range 44 West, 6th P.M.
Section 12: All
Section 13: NW¼, S½
Section 14: E½
Section 23: E½
Section 36: E½
Township 3 South, Range 43 West, 6th P.M.
Section 3: N½
Section 6: All
Sections 7 through 9: N½
Township 3 South, Range 44 West, 6th P.M.
Section 1: All
In addition, no more than one well productive from the Niobrara Formation should be drilled in any governmental quarter-quarter section or, for irregular sections, the survey lot equivalent. With respect to any existing productive Niobrara Formation wells having a surface location in the boundary between two 40-acre tracts, between two survey lots, or between a survey lot and a 40-acre tract, the operator of such well should designate the 40-acre tract or survey lot equivalent for which such well should be the permitted well.
7. Testimony presented at the administrative hearing indicated that the lease ownership in the application area had been researched and all appropriate owners had been identified and notified.
8. Testimony and exhibits presented at the administrative hearing showed that the applications submitted by Mountain Petroleum and Petroleum Development Corporation to increase well density to four (4) wells per 160-acre drilling and spacing unit cover the entire Beecher Island Field. Additional testimony indicated the relative position of the Beecher Island zone within the Niobrara Formation and that the Beecher Island Formation is continuous underlying the application area. Further testimony and exhibits showed the current production from the Beecher Island Field and that the production increase in 1997 was due to additional drilling resulting from the approval of Order No. 300-7. The estimated ultimate recovery for the field is 133 BCF of gas.
9. Testimony and exhibits presented at the administrative hearing showed that estimated reserves in place are 200 BCF of gas. Additional testimony indicated the current recovery for the Beecher Island Field is 66.4% of original gas in place and that the drilling of two (2) additional wells per 160-acre drilling and spacing unit would recover an additional 39.7 BCF of gas, which would allow a final recovery of 86% of the original gas in place.
10. Testimony and exhibits presented at the administrative hearing showed the additional wells would be economic with a rate of return of 28.5%.
11. At the time of the administrative hearing, Mountain Petroleum Corporation agreed to be bound by oral order of the Commission.
12. Based upon the facts stated in the verified application, and having been heard by the Hearing Officers who recommended approval, the Commission should enter an order to allow up to four (4) wells to be drilled within each 160-acre drilling and spacing unit for the lands described in Finding No. 6 above for the production of gas and associated hydrocarbons from the Niobrara Formation, with the permitted well to be located no closer than 560 feet to the outer boundary of the unit and the Director should be allowed to grant an exception to the permitted well location without prior notice or hearing upon an adequate showing by the operator that topography makes it unreasonable to drill the second well within a 560-foot setback, but no closer than 380 feet from the boundary of the drilling and spacing unit, and requests for any other exception location may be granted in accordance with Rule 318.
NOW, THEREFORE, IT IS ORDERED, that a total of four (4) wells are hereby allowed to be drilled within each 160-acre drilling and spacing unit for the below-listed lands for the production of gas and associated hydrocarbons from the Niobrara Formation, with the permitted well to be located no closer than 560 feet to the outer boundary of the unit:
Township 1 South, Range 43 West, 6th P.M.
Sections 32 and 33: S½
Township 2 South, Range 43 West, 6th P.M.
Section 2: W½
Sections 3 through 5: All
Section 11: W½
Section 14: All
Section 16: All
Sections 19 through 21: All
Section 23: All
Section 26: All
Sections 28 through 31: All
Section 34: All
Township 2 South, Range 44 West, 6th P.M.
Section 12: All
Section 13: NW¼, S½
Section 14: E½
Section 23: E½
Section 36: E½
Township 3 South, Range 43 West, 6th P.M.
Section 3: N½
Section 6: All
Sections 7 through 9: N½
Township 3 South, Range 44 West, 6th P.M.
Section 1: All
IT IS FURTHER ORDERED, that no more than one well productive from the Niobrara Formation shall be drilled in any governmental quarter-quarter section or, for irregular sections, the survey lot equivalent. With respect to any existing productive Niobrara Formation wells having a surface location in the boundary between two 40-acre tracts, between two survey lots, or between a survey lot and a 40-acre tract, the operator of such well shall designate the 40-acre tract or survey lot equivalent for which such well shall be the permitted well.
IT IS FURTHER ORDERED, that the Director shall be allowed to grant an exception to the permitted well location without prior notice or hearing upon an adequate showing by the operator that topography makes it unreasonable to drill the second well within a 560-foot setback, but no closer than 380 feet from the boundary of the drilling and spacing unit, and requests for any other exception location shall be granted in accordance with Rule 318.
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 26th day of March, 2004, as of March 15, 2004.
CORRECTED this _____ day of March, 2004, as of March 15, 2004.
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
March 29, 2004