BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE PROMULGATION ) CAUSE NO. 330
AND ESTABLISHMENT OF FIELD RULES TO )
GOVERN OPERATIONS IN THE ARMEL FIELD, ) ORDER NO. 330-5
YUMA COUNTY, COLORADO )
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission at 9:00 a.m. on March 30, 2009, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to allow an exception to the permitted location for the Crites #01-04 Well located in the NE¼ of Section 4, Township 3 South, Range 42 West, 6th P.M., with a surface location of 686 feet FNL and 802 feet FEL with a total depth of approximately 1,800 feet, for the production of gas and associated hydrocarbons from the Niobrara Formation.
FINDINGS
The Commission finds as follows:
1. Rosewood Resources Inc. (“Rosewood”), 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 22, 1978, the Commission issued Order No. 330-2, which among other things, established 160-acre drilling and spacing units for certain lands, including the NE¼ of Section 4, Township 3 South, Range 42 West, 6th P.M., with the permitted well to be located no closer than 900 feet from the boundaries of the quarter section in which it is located, for the production of gas and associated hydrocarbons from the Niobrara Formation.
5. On October 4, 2005, Rosewood was issued an Application for Permit to Drill (“APD”) for the Crites #01-04 Well located in the NE¼ NE¼ of Section 4, Township 3 South, Range 42 West, 6th P.M., with a proposed location of 900 feet FNL and 900 feet FEL, for drilling through the Niobrara Formation to an estimated total depth of 2,000 feet.
6. On October 21, 2005, a representative from Rosewood met with the surface owners of the proposed APD location, Mr. and Mrs. Crites, and executed a Surface Use Agreement for the drilling of the Crites #01-04 Well. Subsequently, on or around December 1, 2005, Mr. Crites met with a representative from Rosewood on location to confirm the ingress/egress routes for the drilling and completion operations of said well. During this meeting, Mr. Crites requested that the proposed location be moved away from his dry-land farm ground and off the side slope of the hill, moving the location north/northeast, from its originally staked and permitted location, approximately 235 feet.
7. On December 13, 2005, drilling operations commenced on the Crites #01-04 Well location at 686 feet FNL and 802 feet FEL in the NE¼ of Section 4, Township 3 South, Range 42 West, 6th P.M., and was drilled and completed into the Niobrara Formation at a total depth of approximately 1,800 feet, and said well was brought on-line with first gas production on January 26, 2006.
8. On September 22, 2008, the Commission issued Order No. 330-4, which among other things, vacated Order No. 330-2 for certain lands, including the NE¼ of Section 4, Township 3 South, Range 42 West, 6th P.M., and placed the lands under Rule 318.b., which states that such wells drilled to less than a depth of 2,500 feet be located not less than 200 feet from any lease line, and not less than 300 feet from any other producible oil or gas well or drilling well, for the production of gas and any associated hydrocarbons from the Niobrara Formation.
9. On February 9, 2009, Rosewood, by its representative, filed with the Commission a verified application for an order to allow an exception to the permitted location for the Crites #01-04 Well located in the NE¼ of Section 4, Township 3 South, Range 42 West, 6th P.M., with a surface location of 686 feet FNL and 802 feet FEL with a total depth of 1,800 feet, for the production of gas and associated hydrocarbons from the Niobrara Formation.
10. On March 10, 2009, Jerry Soehner, an adjacent royalty interest owner to the NE¼ of Section 4, Township 3 South, Range 42 West, 6th P.M., filed a protest to the application alleging noncompliance with Commission rule and regulations by Rosewood when drilling and producing the Crites #01-04 Well. On March 17, 2009, the parties reached a settlement whereby Mr. Soehner agreed to sign a waiver to the exception location. On March 18, 2009, Mr. Soehner filed a withdrawal of his protest with the Commission .
11. On March 17, 2009, Rosewood, by its attorney, filed with the Commission a written request to approve the application based on the merits of the verified application and the supporting exhibits. Sworn written testimony and exhibits were submitted in support of the application.
12. Testimony and exhibits submitted in support of the application showed that Rosewood holds leasehold interests in Section 33, Township 2 South, Range 42 West, 6th P.M., said lands being adjacent to the Crites #01-04 Well. Additional testimony requested that the Commission take administrative notice of Order No. 330-4 and pleadings contained within its application file, wherein geologic and engineering testimony and associated exhibits supported placing Section 4, Township 3 South, Range 42 West, 6th P.M. under Rule 318.b., which states that any well drilled to less than a depth of 2,500 feet be located not less than 200 feet from any lease line, and not less than 300 feet from any other producible oil or gas well or drilling well, for the production of gas and associated hydrocarbons from the Niobrara Formation. Further testimony showed that the approval of the once nonconforming location for the Crites #01-04 Well as an exception location will not violate correlative rights.
13. The above-referenced testimony and exhibits show that granting the application for an exception location will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas, and will not violate correlative rights.
14. Rosewood Resources Inc. agreed to be bound by oral order of the Commission.
15. Based on the facts stated in the verified application, having received one protest which was subsequently withdrawn, and based on the Hearing Officer review of the application under Rule 511.b., the Commission should enter an order to allow an exception to the permitted location for the Crites #01-04 Well located in the NE¼ of Section 4, Township 3 South, Range 42 West, 6th P.M., with a surface location of 686 feet FNL and 802 feet FEL with a total depth of approximately 1,800 feet, for the production of gas and associated hydrocarbons from the Niobrara Formation.
ORDER
NOW, THEREFORE IT IS ORDERED, that an exception to the permitted location is hereby allowed for the Crites #01-04 Well located in the NE¼ of Section 4, Township 3 South, Range 42 West, 6th P.M., with a surface location of 686 feet FNL and 802 feet FEL with a total depth of approximately 1,800 feet, for the production of gas and associated hydrocarbons from the Niobrara Formation.
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 April, 2009, as of March 30, 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
April 1, 2009