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 BUZZARD FIELD, MESA COUNTY, COLORADO |
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CAUSE NO. 371
ORDER NO. 371-14
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REPORT OF COMMISSION
This cause came on for hearing before the Commission on August 8, 2011, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to: (1) establish a 160-acre drilling and spacing unit for the SW¼ of Section 19, Township 9 South, Range 94 West, 6th P.M. (the “Application Lands”), and approve the equivalent of one well per 10 acres well density within the unit, for the production of gas and associated hydrocarbons from the Mancos, Niobrara, Frontier, and Mowry Formations (the “Deep Formations”; and (2) approve the equivalent of one well per 10 acres well density for the proposed 160-acre drilling and spacing unit for the Application Lands, for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formation of the Mesaverde Group, and the Deep Formations.
FINDINGS
The Commission finds as follows:
1. Laramie Energy II, LLC (“Laramie” 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.
5. On May 18, 1981, the Commission issued Order No. 371-1, which among other things, established a 160-acre drilling and spacing unit for the SW¼ of Section 19, Township 9 South, Range 94 West, 6th P.M., for the production of gas and associated hydrocarbons from the Mesaverde Formation (to include the Williams Fork and Iles Formations), with the permitted wells located no closer than 600 feet from the unit boundaries.
6. On June 9, 2011, Laramie, by its attorney, filed with the Commission a verified application for an order to: (1) establish a 160-acre drilling and spacing unit for the below-listed lands (the “Application Lands”), and approve the equivalent of one well per 10 acres well density within the unit, for the production of gas and associated hydrocarbons from the Deep Formations; and (2) approve the equivalent of one well per 10 acres well density for the proposed 160-acre drilling and spacing unit for the Application Lands, for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formation of the Mesaverde Group and the Deep Formations:
Township 9 South, Range 94 West, 6th P.M.
Section 19: SW¼
All future Williams Fork and Iles Formation wells to be drilled under the Application should be located downhole anywhere upon the Application Lands, but no closer than 100 feet from the boundaries of the unit, without exception being granted by the Commission. It should be provided, however, that in cases where the lands abut or corner lands in respect of which the Commission has not granted the right to drill 10-acre density Williams Fork Formation wells, the well should be located downhole no closer than 200 feet from the boundaries of the unit, without exception being granted by the Commission.
All future Deep Formation wells to be drilled under the Application should be located but no closer than 600 feet from the boundaries of the unit, unless such boundary abuts or corners lands in which the Commission has granted the right to drill 10-acre density wells for the Deep Formations, in which event, the Deep Formation well should be drilled downhole no closer than 100 feet, or the setback footage in such other Deep Formations order, whichever is greater, from that portion of such boundary which so abuts or corners the lands in respect of which 10-acre density downhole drilling for Deep Formation wells has been ordered by the Commission, without exception being granted by the Commission.
All lles Formation wells to be drilled under the Application should be drilled only in connection with the drilling of a Williams Fork Formation well. The above well density and location rules should apply to vertical and directional wells, but not to horizontal wells for which existing Commission rules and orders should continue to apply. Wells to be drilled under 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 Director.
7. On July 26, 2011, Laramie, 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.
8. Land testimony and exhibits submitted in support of the Application by Mark R. Petry, Vice President of Business Development for Laramie, showed that Laramie owns a leasehold interest in the Application Lands.
9. Geologic testimony and exhibits submitted in support of the amended Application by Andrew McCarthy, Senior Consulting Geologist for Laramie, showed that: (1) the Williams Fork, Iles, and Deep Formations underlie and are drilling objectives for wells drilled on the Application Lands; (2) the Williams Fork Formation consists of sand bodies that are highly discontinuous in nature, and wells drilled on 10 acre density will therefore statistically be unlikely to encounter the same sand bodies; and (3) data collected for the Williams Fork and Iles Formations in offset wells can be used as a geologic analogy for the Application Lands.
10. Engineering testimony and exhibits submitted in support of the Application by Robert G. Hea, Vice President of Engineering and Operations for Laramie, showed that the Application Lands are bordered by acreage previously approved by the Commission for 10-acre density drilling in the Williams Fork and Iles Formations, and there are no known differences in these Formations between the Application Lands and the areas already approved by the Commission for 10-acre density. The testimony further stated that nearby Williams Fork wells are draining, on average, approximately ten acres per well. These wells are likely to be economic, and drilling at 20-acre density would leave significant undrained areas behind and create waste. The testimony stated that wells drilled to the Iles Formation only drain on average eight acres, and are not likely to be economic. Therefore, the best way to recover Iles Formation reserves is through joint development with the Williams Fork sands. The testimony stated that the Type Well in the Deep Formations is draining approximately 9.9 acres. Drilling at 20-acre density would leave significant undrained areas behind and create waste. Developing the Williams Fork, Iles, and Deep Formations in common wellbores drilled on 10-acre density is the most efficient and unobtrusive method to recover these reserves, and would not result in the drilling of unnecessary wells
11. The above-referenced testimony and exhibits show that granting the Application will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of hydrocarbons, and will not violate correlative rights.
12. The Application was reviewed by the Colorado Department of Public Health and Environment (“CDPHE”) pursuant to consultation provisions of Rule 306.d. In a letter dated July 29, 2011, the CDPHE Oil & Gas Coordinator indicated that CDPHE does not believe any additional conditions of approval are necessary for approving the amended Application.
13. Laramie agreed to be bound by oral order of the Commission.
14. 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) establishing a 160-acre drilling and spacing unit for the Application Lands, and approve the equivalent of one well per 10 acres well density within the unit, for the production of gas and associated hydrocarbons from the Deep Formations.; and (2) approving the equivalent of one well per 10 acres well density for the proposed 160-acre drilling and spacing unit for the Application Lands, for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formation of the Mesaverde Group, and the Deep Formations.
ORDER
NOW, THEREFORE IT IS ORDERED, that a 160-acre drilling and spacing unit is hereby established for the below-listed lands, and the equivalent of one well per 10 acres well density is hereby approved within the unit, for the production of gas and associated hydrocarbons from the Mancos, Niobrara, Frontier, and Mowry Formations (the "Deep Formations"):
Township 9 South, Range 94 West, 6th P.M.
Section 19: SW¼
IT IS FURTHER ORDERED, that the equivalent of one well per 10 acres well density is hereby approved for the proposed 160-acre drilling and spacing unit for the below-listed lands, for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formation of the Mesaverde Group and the Deep Formations:
Township 9 South, Range 94 West, 6th P.M.
Section 19: SW¼
IT IS FURTHER ORDERED, that all future Williams Fork and Iles Formation wells to be drilled under the Application shall be located downhole anywhere upon the Application Lands, but no closer than 100 feet from the boundaries of the unit, without exception being granted by the Commission. However, in cases where the lands abut or corner lands where the Commission has not granted the right to drill 10-acre density Williams Fork Formation wells, the well shall be located downhole no closer than 200 feet from the boundaries of the unit, without exception being granted by the Commission.
IT IS FURTHER ORDERED, that all future Deep Formation wells to be drilled under the Application shall be located anywhere within the unit, but no closer than 600 feet from the boundaries of the unit, unless such boundary abuts or corners lands in which the Commission has granted the right to drill 10-acre density wells for the Deep Formations, in which case, the Deep Formation well shall be drilled downhole no closer than 100 feet, or the setback footage in such other Deep Formations order, whichever is greater, from that portion of such boundary which so abuts or corners the lands in respect of which 10-acre density downhole drilling for Deep Formation wells has been ordered by the Commission, without exception being granted by the Commission.
IT IS FURTHER ORDERED, that all lles Formation wells to be drilled under the Application shall be drilled only in connection with the drilling of a Williams Fork Formation well. The above well density and location rules shall apply to vertical and directional wells, but not to horizontal wells for which existing Commission rules and orders shall continue to apply. Wells to be drilled under 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 Director of the Commission.
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 12th day of August, 2011, as of August 8, 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
August 12, 2011