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 FIELDS, MESA COUNTY, COLORADO

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CAUSE NOS.  369 & 399

 

ORDER NOS. 369-8  & 399-8

 

 

REPORT OF COMMISSION

 

                        The Commission heard this matter on September 19, 2011, at  the Broomfield City & County Building, One Descombes Drive, Broomfield, Colorado  80020, for an order to establish five exploratory drilling and spacing units for certain lands located in Sections 20 through 29, Township 9 South, Range 93 West, 6th P.M., and approve the equivalent of one well per 10 acres well density for the units, for the production of oil, gas and associated hydrocarbons from the Mancos, Niobrara, Frontier, and Mowry Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.    Delta Petroleum Corporation (“Delta” 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.  Certain lands located in Sections 20 through 29, Township 9 South, Range 93 West, 6th P.M. are subject to this Rule for the Mancos, Niobrara, Frontier, and Mowry Formations.

 

5.    On June 1, 2010, the Commission entered Order Nos. 369-7 and 399-7, which among other things, limited the number of well sites per section to no more than three in Sections 28 and 29, Township 9 South, 93 West, 6th P.M., and restricted ground disturbing activities to no more than one well site during the period of January 1 to March 31 in any year.

 

6.    On June 9, 2011, Delta, by its attorneys, filed with the Commission a verified application (the “Application”) for an order to establish five (5) exploratory drilling and spacing units for the below-described lands, (the “Application Lands”) and approve the equivalent of one well per 10 acres well density for the drilling of vertical and directional wells, for the production of oil, gas and associated hydrocarbons from the Mancos, Niobrara, Frontier, and Mowry Formations (the “Mancos Group Formations”), with the permitted well to be located no closer than 600 feet from the boundary of the unit, without exception being granted by the Commission:

 

Exploratory Drilling and Spacing Unit #1

 

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

Section 20:

Section 29:

All

 

Exploratory Drilling and Spacing Unit #2

 

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

Section 21:

Section 28:

All

 

 

Exploratory Drilling and Spacing Unit #3

 

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

Section 22:

Section 27:

S˝ N˝ and S˝

All

 

Exploratory Drilling and Spacing Unit #4

 

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

Section 23:

Section 26:

All

All

 

Exploratory Drilling and Spacing Unit #5

 

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

Section 24:

Section 25:

All

 

Additionally, Delta has requested that any horizontal well permitted within the proposed exploratory drilling and spacing unit should be located anywhere on the surface of the unit, and the treated interval of the wellbore no closer than 600 feet from the boundary of the unit, without exception being granted by the Commission.

 

7.  On July 19, 2011 this matter was continued to the September 19, 2011at Delta’s request.

 

8.  On August 4, 2011the Hearing Officer met informally with Delta representatives and Commission Permit/Technical Services Unit staff (Permitting Staff) to discuss the Application and resolve issues about the Application. 

 

9.  On August  23, 2011, 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.

 

                        10.  Land testimony and exhibits submitted in support of the Application by Paul M. Joeckel, Land Manager for Delta, shows that Delta is the predominant lease holder across the Application Lands.  The testimony further revealed that Sections 28 and 29 of the Application Lands are be subject to Order No. 399-7, which limits the number of well pads to no more than three in each of Sections 28, and 29, and restricts ground disturbing activities to no more than one well site per section during the period of January 1 to March 31 in any year; without further approvals by the Commission.  Delta agrees that these restrictions will continue to apply to Sections 28 and 29 for Delta’s development of the Mancos Group Formations. Delta further agrees that any wells on the remaining Application Lands shall be drilled 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 or the Commission.

 

11. Geology testimony and exhibits submitted in support of the Application by Leslie O’Connor, professional geologist and Managing Partner of MHA Petroleum Consultants, LLC, show that the geologic model of the Application Lands looks very similar to that of nearby lands spaced at ten acre density by Laramie (Docket No. 1101-SP-04, Order No. 429-13) and Antero (Docket No. 0901-SP-03, Order No. 191-61).    Due to lateral geologic consistencies within the Mancos Group Formations, data collected in offset wells can be used as a geologic analogy for the Application Lands.  Further testimony reveals there are no known differences in the Mancos Group interval between the Application Lands and nearby areas already approved for 10-acre density.

12.  Engineering testimony and exhibits submitted in support of the Application by John P. Seidle, Vice President of MHA Petroleum Consultants, showed the Application Lands are located immediately to the east of acreage previously approved for 10-acre density drilling in the Mancos Group Formations and that vertical Mancos Group Formations wells within the Application Lands are expected to drain approximately 9.2 acres. Testimony reveals drilling at 20-acre density would leave significant undrained areas in place and create waste. Vertical wells on the Application Lands are expected to be economic, while horizontal Mancos Group Formations wells are promising but unproven, and should be tested further on the Application Lands to determine recovery.

                        13.  The Hearing Officer further consulted Permitting Staff with regard to language for this Draft Report of Commission related to geologic formation identification and setback distances necessary to achieve the intended effective well density of not more than one well per ten acres. Permitting Staff suggested that reference to the Mancos, Niobrara, Frontier, and Mowry Formations as “Mancos Group Formations” include “similar members of the Mancos Group Formations”.  Permitting Staff also suggested that interwell setbacks be established at 300 feet to satisfy the intent that well density not exceed more than one well per ten acres. This setback distance will maintain the appropriate well density.

 

 14.  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.

 

15.  Delta agreed to be bound by oral order of the Commission. 

 

16.  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 establish five exploratory drilling and spacing units for certain lands located in Sections 20 through 29, Township 9 South, Range 93 West, 6th P.M., and approve  the equivalent of one well per 10 acres well density for the units, for the production of oil, gas and associated hydrocarbons from the Mancos, Niobrara, Frontier, and Mowry Formations.

 

ORDER

 

NOW, THEREFORE IT IS ORDERED, that five exploratory drilling and spacing units are hereby established for the below-described lands, and the equivalent of one well per 10 acres well density is hereby approved for the drilling of vertical and directional wells, for the production of oil, gas and associated hydrocarbons from the Mancos, Niobrara, Frontier, and Mowry Formations, and similar members of the Mancos Group Formations, with permitted wells to be located no closer than 600 feet from the boundary of the unit, without exception being granted by the Commission:

 

Exploratory Drilling and Spacing Unit #1

 

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

Section 20:

Section 29:

All

 

Exploratory Drilling and Spacing Unit #2

 

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

Section 21:

Section 28:

All

 

Exploratory Drilling and Spacing Unit #3

 

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

Section 22:

Section 27:

S˝ N˝ and S˝

All

 

Exploratory Drilling and Spacing Unit #4

 

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

Section 23:

Section 26:

All

All

 

Exploratory Drilling and Spacing Unit #5

 

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

Section 24:

Section 25:

All

 

IT IS FURTHER ORDERED, any producing completion within the Mancos, Niobrara, Frontier, Mowry or similar member of the Mancos Group Formation, shall be no closer than 300 feet from any other producing completion within the same Mancos, Niobrara, Frontier, Mowry or similar member of the Mancos Group Formation, without an exception being granted by the Director or the Commission, and in no case shall the vertical or directional well density result in more than one well per ten acres.

IT IS FURTHER ORDERED that wells within Sections 28 and 29, Township 9 South, Range 93 West of the Application Lands shall remain subject to Order No. 399-7, which limits the number of surface well pads to no more than three each in Sections 28, and in Section 29, and restricts ground disturbing activities to no more than one well pad per section during the period of January 1 to March 31 in any year. Delta may be relieved from these restrictions by the Commission, if Delta shows additional well sites are necessary upon application for a hearing on the matter.

IT IS FURTHER ORDERED , that any wells on the remaining Application Lands not located in Sections 28 and 29, shall be drilled 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 or the Commission.

IT IS FURTHER ORDERED, that there is no limit on the number of horizontal wells within the Application Lands, provided a 300 foot setback is maintained between the completed intervals of producing completions in the same Mancos Group formation, and a 600 setback is maintained from the boundary of the unit., unless an exception is granted by 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    23rd   day of September, 2011, as of September 19, 2011.

           

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By____________________________________         

                                                                                    Peter J. Gowen, Acting Secretary

 

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

September 23, 2011