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 CREEK AND VEGA UNIT FIELDS, MESA COUNTY, COLORADO

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CAUSE NOS. 369 and 399

 

ORDER NOS. 369-3 and 399-3

 

 

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 establish 320-acre drilling and spacing units for the S of Section 22 and all of Section 27, Township 9 South, Range 93 West, 6th P.M., and to allow the equivalent of one well per 20 acres for certain lands in Townships 8 through 10 South, Ranges 92 and 93 West, 6th P.M., for production of gas and associated hydrocarbons from the Williams Fork and Iles Formations (including but not limited to the Rollins, Cozzette and Corcoran).

FINDINGS

The Commission finds as follows:

1. EnCana Oil & Gas (USA) Inc. ("EnCana"), 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 April 20, 1981, the Commission issued Order No. 369-1, which among other things, established 320-acre drilling and spacing units, including Sections 23 through 26, Township 9 South, Range 93 West, 6th P.M., for the production of gas and associated hydrocarbons from the Mesaverde Formation.

 

5.       On May 16, 1983, the Commission issued Order No. 399-1, which among other things, established approximate 320-acre drilling and spacing units for Sections 1 and 2, Township 10 South, Range 93 West 6th P.M., for the production of gas and associated hydrocarbons from the Mesaverde Formation.

6. On March 20, 2007, amended on March 29, 2007, EnCana Oil & Gas (USA) Inc. (EnCana), by its attorney, filed with the Commission a verified application for an order to establish 320-acre drilling and spacing units for the S of Section 22 and all of Section 27, Township 9 South, Range 93 West, 6th P.M., and to allow the equivalent of one well per 20 acres for the below-listed lands, for production of gas and associated hydrocarbons from the Williams Fork and Iles Formations (including but not limited to the Rollins, Cozzette and Corcoran):

 

Township 8 South, Range 92 West, 6th P.M.

Section 31: SW SE

 

Township 9 South, Range 92 West, 6th P.M.

Section 6: Lots 1-6, S NE, SE (All)

Section 7: Lots 1-4, E (All)

Section 18: Lots 1-4, E (All)

Section 19: Lots 1-4, E (All)

 

Township 8 South, Range 93 West, 6th P.M.

Section 1: Lots 1-3 (All)

 

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

Section 1:                         Lots 2, 5, 6, 7, SW NE, NW SE (all that part of the E of Section 1, 

                                                outside of the Buzzard Creek Unit), Lots 3 & 4, S NW

Section 13:                          S S

Section 14: SE SE

Section 21: S

Section 22: S N, S

Sections 23 through 28: All

Section 35: N NE

Section 36: All

 

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

Section 1: Lots 7-10, S NW, that part of Tract 37 lying in the S NW and N SW

Section 2: Lots 5-12, SW NE, NW SE, that part of Tract 37 lying in the NE SE

Section 3: S N, N S, SE SE

 

That as to all future Williams Fork Formation and Iles Formation wells to be drilled upon the application lands within the 320-acre drilling and spacing units, each well may be located anywhere downhole in the established drilling and spacing unit but no closer than 200 feet from the boundaries of the unit and 400 feet from any existing Williams Fork Formation well, without exception being granted by the Director of the Oil and Gas Conservation Commission.

 

For lands outside the 320-acre drilling and spacing units, each well may be located anywhere downhole in the established drilling and spacing unit but no closer than 200 feet from any lease line, and 400 feet from any existing Williams Fork Formation and Iles Formation wells, without exception being granted by the Director of the Oil and Gas Conservation Commission.

 

That all Williams Fork Formation and Iles Formation wells drilled upon the application lands will be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section unless exception is granted by the Director of the Colorado Oil and Gas Conservation Commission. In addition, both the Williams Fork and Iles Formations will be reached from a single wellbore, i.e., separate wells will not be drilled to reach each formation.

7. On April 24, 2007, EnCana, 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. Testimony and exhibits submitted in support of the application showed that EnCana is the majority leasehold owner in the application lands. The application lands are located predominately adjacent to the Buzzard and Vega Federal Exploratory Units.

 

9. Testimony and exhibits submitted in support of the application showed that the Williams Fork and Iles Formations are members of the Mesaverde Group and are common sources of supply, but due to the heterogeneity of the formations increased density is necessary to recover the reserves.

 

10. Testimony and exhibits submitted in support of the application indicated that numerous exhibits have been presented in support of previous applications which showed the fluvial nature of the Williams Fork Formation, its extreme heterogeneity, and the necessity of increased well density on a 20-acre basis to efficiently and economically recover the resources. The Commission takes administrative notice of the testimony and exhibits previously presented and submitted.

 

11. Testimony and exhibits submitted in support of the application showed the Swansons mean of the original gas in place (OGIP) associated with the analog wells is 72.6 BCFE per 640 acres.

 

12. Testimony and exhibits submitted in support of the application indicated approximately 1.8 BCFE for a well from Section 21 drilled in/just outside the application lands, reflecting a steep initial decline for Mesaverde Formation wells, with an effective decline hyperbolic exponent of 1.2 and an exponential outer decline of approximately 7%.

 

13. Testimony and exhibits submitted in support of the application indicate that one well per 20 acres will recover incremental reserves preventing waste, while minimizing interference between wells and prevent the drilling of unnecessary wells.

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

 

15. Testimony and exhibits submitted in support of the application showed that increasing the well density to 20 acres in the application area will increase the estimated ultimate recovery per section for the Williams Fork and Iles Formations. Additional testimony indicated that one well per 320 acres provides a recovery factor of gas in place of 6%. Further testimony indicated that if 16 wells per 320 acres are allowed, the percentage increases to 30%. The incremental BCFE in recoverable reserves is 10.1 or 24%.

 

16. Testimony and exhibits submitted in support of the application indicated that partial depletion is minimized and incremental recovery will be maximized in the application area by drilling bottomhole locations stacked along an elliptical drainage pattern.  Additional testimony indicated that the drainage ellipses are tectonically controlled by principle stress and the resulting orientation of the hydraulic fracture.  This fact can be demonstrated and verified through comparing the projected ultimate recoveries of the Currier #9-15 Well located in Section 9, Township 9 South, Range 93 West, 6th P.M., drilled in 2005 and completed in the Williams Fork and Iles Formations, to the two direct offsets approximately 45 degrees to the south-west and south-east bottom hole to bottom hole which are respectively: the Currier Family #16-3 Well and the Buzzard Creek #16-1 Well, both located in Section 16, Township 9 South, Range 93 West, 6th P.M.  The Currier Family 16-3 Well and the Buzzard Creek 16-1 Well bottomhole locations are aligned directly along the principle stress direction, whereas the Currier #9-15 Well is approximately 45 degrees out of the principle stress plane defined by the two wells and approximately 1,900 feet.  Comparatively, the Currier #9-15 Well is currently projected to ultimately produce 1.8 BCFE as compared to 0.45 BCFE and 0.36 BCFE projected to ultimately be recovered from the Buzzard Creek 16-1 Well and the Currier Family #16-3 Well, respectively. 

 

17. No protests to the application have been filed with the Commission or the Applicant.

 

18. EnCana Oil & Gas (USA) Inc. agreed to be bound by oral order of the Commission.

 

19. 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.b., the Commission should enter an order to establish 320-acre drilling and spacing units for the S of Section 22 and all of Section 27, Township 9 South, Range 93 West, 6th P.M., and to allow the equivalent of one well per 20 acres for certain lands in Townships 8 through 10 South, Ranges 92 and 93 West, 6th P.M., for production of gas and associated hydrocarbons from the Williams Fork and Iles Formations (including but not limited to the Rollins, Cozzette and Corcoran).

 

ORDER

 

NOW, THEREFORE, IT IS ORDERED, that 320-acre drilling and spacing units are hereby established for the S of Section 22 and all of Section 27, Township 9 South, Range 93 West, 6th P.M., for production of gas and associated hydrocarbons from the Williams Fork and Iles Formations (including but not limited to the Rollins, Cozzette and Corcoran).

 

IT IS FURTHER ORDERED, that additional wells, the equivalent of one well per 20 acres, are hereby allowed to be optionally drilled into and produced from the Williams Fork and Iles Formations (including but not limited to the Rollins, Cozzette and Corcoran), for the below-listed lands, and that for the lands within the 320-acre drilling and spacing units the setback requirements shall be 200 feet from the boundaries of the drilling and spacing unit and 400 feet from any existing Williams Fork Formation or Iles Formation well absent an exception from the Commission. For the lands outside the currently spaced 320-acre drilling and spacing units, the setback requirements shall be 200 feet from any lease line, and 400 feet from any existing Williams Fork Formation or Iles Formation well absent an exception from the Commission.

 

Township 8 South, Range 92 West, 6th P.M.

Section 31: SW SE

 

Township 9 South, Range 92 West, 6th P.M.

Section 6: Lots 1-6, S NE, SE (All)

Section 7: Lots 1-4, E (All)

Section 18: Lots 1-4, E (All)

Section 19: Lots 1-4, E (All)

 

Township 8 South, Range 93 West, 6th P.M.

Section 1: Lots 1-3 (All)

 

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

Section 1: Lots 2, 5, 6, 7, SW NE, NW SE (all that part of the E of Section 1,

                                                outside of the Buzzard Creek Unit), Lots 3 & 4, S NW

Section 13: S S

Section 14: SE SE

Section 21: S

Section 22: S N, S

Sections 23 through 28: All

Section 35: N NE

Section 36: All

 

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

Section 1: Lots 7-10, S NW, that part of Tract 37 lying in the S NW and N SW

Section 2: Lots 5-12, SW NE, NW SE, that part of Tract 37 lying in the NE SE

Section 3: S N, N S, SE SE

 

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