BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE PROMULGATION AND ) CAUSE NO. 318
ESTABLISHMENT OF FIELD RULES TO GOVERN )
OPERATIONS IN THE REPUBLICAN FIELD, ) ORDER NO. 318-8
YUMA COUNTY, COLORADO )
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 Petroleum Development Corporation for an order to allow up to a total of three (3) wells to be drilled within each 160-acre drilling and spacing unit for certain listed lands for the production of gas and associated hydrocarbons from the Niobrara Formation, at the option of the operator, with the permitted location to be anywhere within the 160-acre drilling and spacing unit upon which it is drilled provided it is located no closer than 560 feet from the outer boundaries of the unit.
The Commission finds as follows:
1. Petroleum Development Corporation (“PDC”), 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 July 17, 1994 (amended August 19, 1994), the Commission issued Order No. 318-5, which allowed an additional well to be drilled on each 160-acre drilling and spacing unit in the Republican 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 the 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 December 22, 2003, Petroleum Development Corporation (“PDC”), by its attorney, filed with the Commission a verified application for an order to allow up to a total of three (3) 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, at the option of the operator, with the permitted location to be anywhere within the 160-acre drilling and spacing unit upon which it is drilled provided it is located no closer than 560 feet from the outer boundaries of the unit. In addition, PDC requested 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 any additional well within a 560 foot setback, but no closer than 380 feet from the boundary of the drilling and spacing unit and requests that any other exception location may be granted in accordance with Rule 318.
Township 1 North, Range 45 West, 6th PM
Sections 25 through 28: All
7. Testimony and exhibits presented at the administrative hearing showed the outline of the application lands, which consists of approximately four sections in the Republican Field in Yuma County and the lease situation in the application area. Additional testimony indicated that all interested parties have been notified of the application, and that no protests have been received.
8. Testimony and exhibits presented at the administrative hearing indicated that the application lands are located in the D-J Basin in northeast Colorado and that the Niobrara Formation includes the Beecher Island zone, the producing interval. Additional testimony indicated that the average porosity of the Beecher Island zone is thirty-six percent (36%) and the average permeability is <.1 milidarcy. Further testimony indicated that the Niobrara occurs at a depth of 2100 to 2300 feet and that faults are present in the Niobrara Formation. Additional testimony indicated pay thickness of 36 to 48 feet underlying the application area.
9. Testimony and exhibits presented at the administrative hearing showed the current cumulative production, the estimated ultimate recovery and the original gas in place for wells in the application area. Additional testimony indicated that the average well in the application area drains 65 acres and that a third additional well in each 160-acre drilling and spacing unit would recover an additional 253 MMCF of reserves.
10. Testimony presented at the administrative hearing indicated additional wells would be economic and have rates of return in excess of 25%.
11. At the time of the administrative hearing, Petroleum Development 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 a total of three (3) 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, at the option of the operator, with the permitted location to be anywhere within the 160-acre drilling and spacing unit upon which it is drilled provided it is located no closer than 560 feet from the outer boundaries of the unit. In addition, 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 any additional well within a 560 foot setback, but no closer than 380 feet from the boundary of the drilling and spacing unit and any other exception location may be granted in accordance with Rule 318.
NOW, THEREFORE, IT IS ORDERED, that a total of three (3) 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, at the option of the operator, with the permitted location to be anywhere within the 160-acre drilling and spacing unit upon which it is drilled provided it is located no closer than 560 feet from the outer boundaries of the unit:
Township 1 North, Range 45 West, 6th PM
Sections 25 through 28: All
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 any additional 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 _____ 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 26, 2004