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 VEGA FIELD, MESA COUNTY, COLORADO

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CAUSE NO. 399

ORDER NO. 399-2

 

REPORT OF THE COMMISSION

 

This cause came on for hearing before the Commission at 9:00 a.m. on May 10, 2007, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to increase the number of wells which can be optionally drilled into and produced from the Mesaverde Group (including the Williams Fork, Cozzette and Corcoran Formations) for certain lands in Township 10 South, Range 93 West, 6th P.M., the equivalent of one Mesaverde Formation well per 20 acres, with each well located no closer than 200 feet from the boundaries of any lease line or from the boundaries of the application lands and no closer than 400 feet from any existing Mesaverde Group well without exception being granted by the Director of the Oil and Gas Conservation Commission.

 

FINDINGS

 

The Commission finds as follows:

 

1. Delta Petroleum Corporation ("Delta"), 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 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. Certain lands in Township 10 South, Range 93 West, 6th P.M. are subject to this rule.

 

5. On April 11, 1977, the Bureau of Land Management approved the Vega Unit as a federal exploratory unit. The Vega Unit has been contracted to the following lands:

Township 9 South, Range 93 West, 6th P. M.

Section 33: E E

Section 34: All

Section 35: W, SE, S NE

Township 10 South, Range 93 West, 6th P. M.

Section 3: Lots 1, 2, 3, 4 (N N), S SW, SW SE

Section 4: SE SW, S SE

Section 9: NE, E NW, NE SE

Section 10: N, N SW, SE SW, SE

6. On November 20, 2006, Delta, by its attorney, filed with the Commission a verified application for an order to allow the number of wells which can be optionally produced from the Mesaverde Group (including the Williams Fork, Cozzette and Corcoran Formations) the equivalent of one well per 20 acres, with the permitted wells to be located downhole anywhere underlying the below-listed application lands but no closer than 200 feet from any lease line or outer boundaries of the application lands and no closer than 400 feet from any existing Mesaverde Group well, without exception being granted by the Director. In addition, wells drilled on the application lands will be drilled from the surface either vertically or directionally from no more than one multi-well surface site per quarter quarter section unless exception is granted by the Director of the Colorado Oil and Gas Conservation Commission. On February 8, 2007, Delta Petroleum Corporation, by its attorney, filed with the Commission a correction to the legal description in Sections 15 and 16 of the application lands.

Township 10 South, Range 93 West, 6th P.M.

Section 4: E NE, N SE, N SW, SW SW

Section 5: S SE

Section 8: E

Section 9: W W, E SW, W SE, SE SE

Section 10: SW SW

Section 15: Tract 39 (N NE, except Lots 3 and 4, NE NW except Lot 2) and Part of Tract 40 (NW NW except Lot 1)

Section 16: Part of Tract 40 (N NE except Lots 4 and 5, NE NW except Lots 2 and 3)

 

7. On December 22, 2006, EnCana Oil & Gas (USA) Inc. (EnCana), by its attorney, filed with the Commission a protest to the application.

 

8. On December 26, 2006, Delta, by its attorney, filed with the Commission a written request to continue this matter to the February hearing and the hearing in this matter was continued. On January 15, 2007, Delta, by its attorney, filed a verbal request to continue this matter to the March hearing, and the hearing in this matter was continued. On March 19, 2007, Delta, by its attorney, filed a written request to continue this matter to the May hearing and the hearing was continued.

 

9. On April 26, 2007, EnCana, by its attorney, withdrew its protest to the application as the parties had reached a settlement resolving their differences.

 

10. On April 24, 2007, Delta, 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.

 

   11. Testimony and exhibits submitted in support of the application showed that Delta is the 100% leasehold owner in the application lands.

 

12. Testimony and exhibits submitted in support of the application showed that the Williams Fork, Cozzette and Corcoran Formations are subsections of the Mesaverde Group.

 

13. Testimony and exhibits submitted in support of the application showed that the Mesaverde Group is between 3,000 and 3,500 feet thick in the application area.

 

14. Testimony and exhibits submitted in support of the application showed that the estimated Williams Fork, Cozzette and Corcoran Formations reserves for the application lands vary from approximately 60 to 80 BCF per section.

 

15. Testimony and exhibits submitted in support of the application indicated low porosity of less than 13%, with an average permeability less than 0.1 millidarcies.

 

16. Testimony and exhibits submitted in support of the application at prior administrative hearing(s) showed that hydraulically induced fractures will propagate in a northwest-southeast orientation, creating an elliptical northwest-southeast drainage pattern in the application area. Additional testimony indicated that although Delta has not yet compiled reservoir pressure data for the application lands, it believes that the pressures are analogous to pressure information gathered in the central part of the Piceance Basin, specifically described in the reservoir engineering data presented in the Williams Production RMT Company Report dated April 24, 2006.

 

17. Testimony and exhibits submitted in support of the application showed that current well density will not effectively drain the Williams Fork, Cozzette and Corcoran Formations. Additional testimony indicated that an average of approximately 20 acres are drained by one well in the application area.

 

18. Testimony and exhibits submitted in support of the application showed that increasing well density to 20 acres in the application area will increase the estimated ultimate recovery per section for the Mesaverde Group, and that approximately 65% recovery of original gas in place will be possible. The application lands lie within the 1.2 BCF per well area.

19. Delta Petroleum Corporation agreed to be bound by oral order of the Commission.

20. Based on the facts stated in the verified application, having resolved the protest and based on the Hearing Officer review of the application under Rule 511.b., the Commission should enter an order to increase the number of wells which can be optionally drilled into and produced from the Mesaverde Group (including the Williams Fork, Cozzette and Corcoran Formations) for certain lands in Township 10 South, Range 93 West, 6th P.M., the equivalent of one Mesaverde Formation well per 20 acres, with each well located no closer than 200 feet from the boundaries of any lease line or from the boundaries of the application lands and no closer than 400 feet from any existing Mesaverde Group well without exception being granted by the Director of the Oil and Gas Conservation Commission.

 

ORDER

 

NOW, THEREFORE, IT IS ORDERED, that additional wells are hereby allowed to be optionally drilled into and produced from the Mesaverde Group (including the Williams Fork, Cozzette and Corcoran Formations), for the below-listed lands, the equivalent of one Williams Fork, Cozzette and Corcoran Formation well per 20 acres, with each well located no closer than 200 feet from the boundaries of any lease line and no closer than 400 feet from any existing Mesaverde Group well without exception being granted by the Director of the Oil and Gas Conservation Commission:

 

Township 10 South, Range 93 West, 6th P.M.

Section 4: E NE, N SE, N SW, SW SW

Section 5: S SE

Section 8: E

Section 9: W W, E SW, W SE, SE SE

Section 10: SW SW

Section 15: Tract 39 (N NE, except Lots 3 and 4, NE NW except Lot 2) and Part of Tract 40 (NW NW except Lot 1)

Section 16: Part of Tract 40 (N NE except Lots 4 and 5, NE NW except Lots 2 and 3)

 

IT IS FURTHER ORDERED, that wells to be drilled under this application shall be drilled from the surface either vertically or directionally from no more than one well pad located on a given quarter quarter section unless exception is granted by the Director of the Colorado Oil and Gas Conservation Commission.

 

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 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 May, 2007, as of May 10, 2007.

 

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

May 25, 2007