BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE APPLICATION OF HRM RESOURCES, LLC FOR AN ORDER TO POOL ALL
INTERESTS IN AN APPROXIMATE 160-ACRE DRILLING AND SPACING UNIT ESTABLISHED FOR
SECTION 36, TOWNSHIP 6 NORTH, RANGE 66 WEST, 6TH P.M., FOR THE CODELL
AND NIOBRARA FORMATIONS, BRACEWELL FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 381
DOCKET NO. 1302-UP-33
ORDER NO. 381-18
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REPORT OF THE COMMISSION
The Commission heard this matter on February 11, 2013, at the offices of the
Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801,
Denver, Colorado, upon application for an order to pool all interests in an
approximate 160-acre drilling and spacing unit established for Section 36,
Township 6 North, Range 66 West, 6th P.M., to accommodate the
drilling of the Hiner 31-36 Well, the Hiner 32-36 Well, the Hiner 41-36 Well,
the Hiner 42-36 Well, and the Hiner 6-2-36 Well, for the development and
operation of the Codell and Niobrara Formations.
FINDINGS
The Commission finds as follows:
1.
HRM Resources, LLC (“HRM” 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.
On June 27, 1983, the Commission entered Order No. 381-1 which, among
other things, established 80-acre drilling and spacing units for the production
of oil and associated hydrocarbons from the Codell Formation underlying certain
lands in the Bracewell Field.
Section 36, Township 6 North, Range 66 West, 6th P.M. is subject to
this Order for the Codell Formation.
5.
On June 18, 1984, the Commission entered Order No. 381-2 which, among
other things, established 80-acre drilling and spacing units for the production
of oil and associated hydrocarbons from the Niobrara Formation. By Order No. 381-2, the Niobrara
Formation was included in the spaced area of the Bracewell Field as provided for
in Order No. 381-1. Section 36,
Township 6 North, Range 66 West, 6th P.M. is subject to this Order
for the Niobrara Formation.
6.
On June 18, 1984, the Commission entered Order No. 381-3 which, among
other things, permitted multiple completion of wells in the Codell and Niobrara
Formations, and where there is no difference in ownership between formations, to
commingle production from the formations in the wellbore for existing wells and
wells to be drilled. Section 36,
Township 6 North, Range 66 West, 6th P.M. is subject to this Order
for the Codell and Niobrara Formations.
7.
On February 18, 1985, the Commission entered Order No. 381-5 which, among
other things, approved an optional additional well on each established 80-acre
drilling and spacing unit in the undrilled 40-acre tract, for the production of
oil and associated hydrocarbons from the Codell and Niobrara Formations. The additional well would be subject
to the Order Nos. 381-1, 381-2, and 381-3.
Section 36, Township 6 North, Range 66 West, 6th P.M. is
subject to this Order for the Codell and Niobrara Formations.
8.
On April 27, 1988, the Commission adopted Rule 318A which, among other
things, allowed certain drilling locations to be utilized to drill or twin a
well, deepen a well or recomplete a well and to commingle any or all Cretaceous
Age Formations from the base of the Dakota Formation to the surface. Rule 318A supersedes all prior
Commission drilling and spacing orders affecting well location and density
requirements of Greater Wattenberg Area wells.
On December 5, 2005, Rule 318A was amended, among other things, to allow
interior infill and boundary wells to be drilled and wellbore spacing units to
be established. On August 8, 2011,
Rule 318A was again amended, among other things, to address drilling of
horizontal wells. Section 36,
Township 6 North, Range 66 West, 6th P.M. is subject to Rule 318A for
the Codell and Niobrara Formations.
9.
On December 13, 2012, HRM, by its attorneys, filed with the Commission
pursuant to §34-60-116 C.R.S., a concurrent application (“Concurrent
Application”), Docket No. 1301-SP-23, for an order to: 1) vacate two approximate
80-acre drilling and spacing units established by Order Nos. 381-1 and 381-2;
and 2) establish an approximate 160-acre drilling and spacing unit, and approve
up to five vertical and/or directional wells to be drilled within the unit, for
the production of oil, gas and associated hydrocarbons from the Codell and
Niobrara Formations.
10. On
December 13, 2012, HRM, by its attorneys, filed with the Commission pursuant to
§34-60-116 C.R.S., a verified application (“Application”) for an order to pool
all interests in an approximate 160-acre drilling and spacing unit established
for the below-described lands (“Application Lands”), for the development and
operation of the Codell and Niobrara Formations, effective as of the earlier of
the date of the Application, or the date that any of the costs specified in
C.R.S. §34-60-116(7)(b)(II) were first incurred for the drilling of the Hiner
31-36 Well, the Hiner 32-36 Well, the Hiner 41-36 Well, the Hiner 42-36 Well,
and the Hiner 6-2-36 Well (“Wells”), and to subject any nonconsenting interests
to the cost recovery provisions of C.R.S. §34-60-116(7):
Township 6 North, Range 66 West, 6th P.M.
Section 36:
NE¼
11. On
January 29, 2013, HRM, 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.
Sworn written testimony and exhibits were submitted in support of the
Application.
12.
Land testimony and exhibits submitted in support of the Application by G. Walter
Lunsford, Acting Land Manager for HRM, showed that all nonconsenting interest
owners were notified of the Application and received and Authority for
Expenditure ("AFE") and offer to participate in the Wells. Further testimony concluded that the
AFE sent by the Applicant to the interest owners was a fair and reasonable
estimate of the costs of the proposed drilling operation and was received at
least 30 days prior to the February 11, 2013 hearing date.
13. 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.
14. HRM
agreed to be bound by oral order of the Commission.
15.
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 to pool all interests in the
approximate 160-acre drilling and spacing unit established for Section 36,
Township 6 North, Range 66 West, 6th P.M., to accommodate the
drilling of the Hiner 31-36 Well, the Hiner 32-36 Well, the Hiner 41-36 Well,
the Hiner 42-36 Well, and the Hiner 6-2-36 Well, for the development and
operation of the Codell and Niobrara Formations.
ORDER
NOW, THEREFORE IT IS ORDERED,
that:
1.
Pursuant to the provisions of §34-60-116, C.R.S., as amended, of the Oil
and Gas Conservation Act, all interests in the approximate 160-acre drilling and
spacing unit established for the below-described lands, are hereby pooled, for
the development and operation of the Codell and Niobrara Formations, effective
as of the earlier of the date of the Application, or the date that any of the
costs specified in C.R.S. §34-60-116(7)(b)(II) are first incurred for the
drilling of the Hiner 31-36 Well, the Hiner 32-36 Well, the Hiner 41-36 Well,
the Hiner 42-36 Well, and the Hiner 6-2-36 Well:
Township 6 North, Range 66 West, 6th P.M.
Section 36:
NE¼
2.
The production obtained from the drilling and spacing unit shall be
allocated to each owner in the unit on the basis of the proportion that the
number of acres in such tract bears to the total number of mineral acres within
the drilling and spacing unit; each owner of an interest in the drilling and
spacing unit shall be entitled to receive its share of the production of the
Well located on the drilling and spacing unit applicable to its interest in the
drilling and spacing unit.
3.
The nonconsenting leased (working interest) owners must reimburse the
consenting working interest owners for their share of the costs and risks of
drilling and operating the Well (including penalties as provided by
§34-60-116(7)(b), C.R.S.) out of production from the drilling and spacing unit
representing the cost-bearing interests of the nonconsenting working interest
owners as provided by §34-60-116(7)(a), C.R.S.
4.
Any unleased owners are hereby deemed to have elected not to participate
and shall therefore be deemed to be nonconsenting as to the Well and be subject
to the penalties as provided for by §34-60-116 (7), C.R.S.
5.
Each nonconsenting unleased owner within the drilling and spacing unit
shall be treated as the owner of the landowner's royalty to the extent of 12.5%
of its record title interest, whatever that interest may be, until such time as
the consenting owners recover, only out of each nonconsenting owner's
proportionate 87.5% share of production, the costs specified in
§34-60-116(7)(b), C.R.S. as amended.
After recovery of such costs, each unleased nonconsenting mineral owner shall
then own its proportionate 8/8ths share of the Well, surface facilities and
production, and then be liable for its proportionate share of further costs
incurred in connection with the Well as if it had originally agreed to the
drilling.
6.
The operator of the well drilled on the above-described drilling and
spacing unit shall furnish the nonconsenting owners with a monthly statement of
all costs incurred, together with the quantity of oil and gas produced, and the
amount of proceeds realized from the sale of production during the preceding
month.
7.
Nothing in this order is intended to conflict with §34-60-116, C.R.S., as
amended. Any conflict that may arise
shall be resolved in favor of the statute.
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 _____ day of February, 2013, as of February 11, 2013.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary