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 BUZZARD FIELD, MESA COUNTY, COLORADO |
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CAUSE NO. 371
ORDER NO. 371-11
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REPORT OF COMMISSION
FINDINGS
The Commission finds as follows:
1. Axia Energy, LLC, (“Axia” or “Applicant”), 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. The W½ of Section 2, Township 9 South, Range 95 West, 6th P.M. is subject to this Rule for the Williams Fork and Iles Formations.
5. On October 21, 2010, the Commission entered Order No. 371-7, which among other things, established an approximate 320-acre drilling and spacing unit for the E½ of Section 2, Township 9 South, Range 95 West, 6th P.M., and approved the equivalent of one well per 10 acres density, for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations. Any permitted Williams Fork Formation or Iles Formation well drilled under said order is to be located downhole anywhere within the unit but no closer than 100 feet from the drilling and spacing unit boundary where immediately adjacent or cornering lands have been approved by the Commission for 10-acre drilling density, and no closer than 200 feet from the drilling and spacing unit boundary where adjacent or cornering lands have not been approved by the Commission for 10-acre density downhole drilling for Williams Fork Formation and Iles Formation wells, unless an exception is granted by the Director of the Commission.
6. On December 23, 2010, Axia, by its attorneys, filed with the Commission a verified application (“Application”) for an order to: 1) vacate the approximate 320-acre drilling and spacing unit established for the E½ of Section 2, Township 9 South, Range 95 West, 6th P.M., (“Application Lands”) for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations; and 2) establish an approximate 640-acre drilling and spacing unit for said Section 2, and authorize the equivalent of one well per 10 acres density for said unit, for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.
Further, any permitted Williams Fork Formation or Iles Formation well drilled under the Application should be located downhole anywhere within the unit but no closer than 100 feet from the drilling and spacing unit boundary where immediately adjacent or cornering lands have been approved by the Commission for 10-acre drilling density, and should be located no closer than 200 feet from the drilling and spacing unit boundary where adjacent or cornering lands have not been approved by the Commission for 10-acre density downhole drilling for Williams Fork Formation and Iles Formation wells, unless an exception is granted by the Director of the Commission.
Furthermore, any well drilled pursuant to the Application should 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 Commission pursuant to application made for such exception.
7. On March 23, 2011, Axia, 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.
8. Testimony and exhibits submitted in support of the Application by Tab McGinley, Vice President of Land for Axia, showed that Axia holds a majority leasehold ownership interest in the Application Lands, and that the Application Lands are in close proximity to other lands that have been approved for 10-acre well density for the Williams Fork and Iles Formations. Further testimony indicated that no more than one surface pad per quarter-quarter section will be utilized for the drilling of the wells, that Axia will utilize existing or common pads for development where possible in an effort to minimize surface disturbance and develop the acreage efficiently, and that Axia will use reasonable efforts to limit pad surface disturbance and the number of pads to develop the acreage efficiently.
9. Testimony and exhibits submitted in support of the Application by Carl Dietz, Senior Consulting Geologist for Axia, showed that the geologic model for the Williams Fork Formation underlying the Application Lands is well understood and indicates that the stratigraphic cross section of the outcrop illustrates the vertical and horizontal complexity of the Williams Fork Formation sand bodies with respect to width, height and lateral discontinuity. Due to the varying sand thickness and lateral discontinuity of the Williams Fork Formation, wells underlying the Application Lands should be drilled on 10-acre density for the best efficiency of the resource and to prevent waste.
10. Testimony and exhibits submitted in support of the Application by Taryn Frenzel, Completions Engineer for Axia, demonstrated that the average net pay across the Application Lands for the Williams Fork and Iles Formations is 322 feet, and that the average water saturation and porosity are 45% and 10%, respectively. Additional testimony showed that the minimum gas-in-place for 10 acres is 1.424 BCF gas, and that based on a recovery factor of 85%, it is expected the Williams Fork and Iles Formations will produce 1.21 BCF gas per 10 acres. Axia is expecting a rate of return of 26% with a discounted payout at 4.5 years. It is predicted that the reserve life is 34.6 years, and is an economically viable project for Axia. Further testimony showed that stand-alone Iles Formation wells are not economical, and that the Iles Formation should be produced in conjunction with the Williams Fork Formation.
11. The above-referenced testimony and exhibits showed that granting the Application will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas, and will not violate correlative rights.
12. Axia agreed to be bound by oral order of the Commission.
13. 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: (1) vacating the approximate 320-acre drilling and spacing unit established for the E½ of Section 2, Township 9 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations; and (2) establishing an approximate 640-acre drilling and spacing unit for said Section 2, and approve of the equivalent of one well per 10 acres density for said unit, for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.
ORDER
NOW, THEREFORE IT IS ORDERED, that the approximate 320-acre drilling and spacing unit established for the E½ of Section 2, Township 9 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations is hereby vacated.
IT IS FURTHER ORDERED, that an approximate 640-acre drilling and spacing unit is hereby established for Section 2, Township 9 South, Range 95 West, 6th P.M., and the equivalent of one well per 10 acres density for said unit is approved, for the production of gas and associated hydrocarbons from the Williams Fork Formation and Iles Formation.
IT IS FURTHER ORDERED, that any permitted Williams Fork Formation or Iles Formation well drilled under the Order shall be located downhole anywhere within the unit but no closer than 100 feet from the drilling and spacing unit boundary where immediately adjacent or cornering lands have been approved by the Commission for 10-acre drilling density, and shall be located no closer than 200 feet from the drilling and spacing unit boundary where adjacent or cornering lands have not been approved by the Commission for 10-acre density downhole drilling for Williams Fork Formation and Iles Formation wells, unless an exception is granted by the Director of the Commission.
IT IS FURTHER ORDERED, that any well drilled pursuant to the Order 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 Commission pursuant to application made for such exception.
IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective immediately.
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 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 15th day of April, 2011, as of April 4, 2011.
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 15, 2011