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 WATTENBERG FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 407

 

ORDER NO. 407-438

 

 

REPORT OF THE COMMISSION

 

                        This cause came on for hearing before the Commission on June 27, 2011, Elbert County Fairgrounds, Ag Building, 95 Ute Avenue, Kiowa, Colorado, for an order to pool all nonconsenting interests in a designated 160-acre wellbore spacing unit for the NE¼ of Section 7, Township 3 North, Range 64 West, 6th P.M., to accommodate the Dechant #7-15 Well, for the development and operation of the Codell and Niobrara Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.     Noble Energy, Inc., (“Noble” 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 December 19, 1983, the Commission issued Order No. 407-1 (amended on March 29, 2000 in accordance with Order No. 407-17, entered November 18, 1985), which among other things, established 80-acre drilling and spacing units for the production of oil and/or gas and associated hydrocarbons from the Codell Formation underlying certain lands, including the NE¼ of Section 7, Township 3 North, Range 64 West, 6th P.M., with the wellbore spacing unit to be designated by the operator drilling the first well in the quarter section, (or the Director, if the operator fails to designate).  The permitted well shall be located in the center of either 40-acre tract within the drilling and spacing unit with a tolerance of 200 feet in any direction.  The operator shall have the option to drill an additional well on the undrilled 40-acre tract in each 80-acre drilling and spacing unit.

 

5.  On February 19, 1992, the Commission issued Order No. 407-87 (amended August 20, 1993), which among other things, established 80-acre drilling and spacing units for the production of oil and/or gas from the Codell and Niobrara Formations underlying certain lands, including the NE¼ of Section 7, Township 3 North, Range 64 West, 6th P.M., with the permitted well locations in accordance with the provisions of Order No. 407-1.

 

6.     On April 27, 1998, 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 of the Cretaceous Age Formations from the base of the Dakota Formation to the surface.  On December 5, 2005, Rule 318A. was amended to, among other things, allow interior infill and boundary wells to be drilled and wellbore spacing units to be established.  The NE¼ of Section 7, Township 3 North, Range 64 West, 6th P.M. is subject to this Rule for the Codell and Niobrara Formations.

 

7.     On April 28, 2011, Noble, by its attorneys, filed with the Commission a verified application (the “Application”) for an order to pool all nonconsenting interests in a designated 160-acre wellbore spacing unit for the below-listed lands, to accommodate the Dechant #7-15 Well (the “Well”), API #05-123-29107, with a planned bottomhole location of 1,321 feet FNL and 1,357 feet FEL in Section 7, Township 3 North, Range 64 West, 6th P.M., for the development and operation of the Codell and Niobrara Formations, retroactive to the earliest date costs are incurred for the Well as allowed by §34-60-116(7), C.R.S., or the date of the Application, whichever is earlier:

 

Township 3 North, Range 64 West, 6th P.M.

Section 7:

NE¼

 

 

8.     On June 14, 2011, Noble, 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.

 

9.     Testimony and exhibits submitted in support of the Application by Joseph Lorenzo, Senior Land Manager for Noble, showed that all nonconsenting interest owners were notified of the Application and received an Authority for Expenditure (“AFE”) and a letter advising them of their rights to participate in the proposed operations within the subject spacing unit.  Further testimony showed that the AFE sent by 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 June 27, 2011 hearing date.

 

10.   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 gas, and will not violate correlative rights.

 

11.   Noble agreed to be bound by oral order of the Commission. 

 

12.   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 pooling all nonconsenting interests in a designated 160-acre wellbore spacing unit for the NE¼ of Section 7, Township 3 North, Range 64 West, 6th P.M., to accommodate the 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 nonconsenting interests in a designated 160-acre wellbore spacing unit for the below-listed lands are hereby pooled to accommodate the Well, for the development and operation of the Codell and Niobrara Formations, retroactive to the earliest date costs are incurred for the Well as allowed by §34-60-116(7), C.R.S., or the date of the Application, whichever is earlier:

 

Township 3 North, Range 64 West, 6th P.M.

Section 7:

NE¼

 

2.     The production obtained from the wellbore spacing unit shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such owner’s tract bears to the total number of mineral acres within the wellbore spacing unit; each owner of an interest in the wellbore spacing unit shall be entitled to receive its share of the production of the Well located on the wellbore spacing unit applicable to its interest in the wellbore 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 wellbore 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 wellbore 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 wellbore 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    30th    day of June, 2011, as of June 27, 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

June 30, 2011