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 407-540

 

 

REPORT OF THE COMMISSION

 

The Commission heard this matter on January 23, 2012, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, upon application for an order to establish an approximate 320-acre drilling and spacing unit for the N˝, Section 28, Township 3 North, Range 68 West, 6th P.M., and approve up to two horizontal wells in addition to the drilled Frederiksen 1A-28H Well (API No. 05-123-33363), for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

 

FINDINGS

 

The Commission finds as follows:

 

1.     Encana Oil & Gas (USA) Inc. (“Encana” 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 March 29, 2000), 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 with the unit to be designated by the operator drilling the first well in the quarter section.  The permitted well shall be located in the center of either 40-acre tract within the 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. Section 28, Township 3 North, Range 68 West, 6th P.M. is subject to this order for the Codell Formation.

 

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, with the permitted well locations in accordance with the provisions of Order No. 407-1. Section 28, Township 3 North, Range 68 West, 6th P.M. is subject to this order for the Codell and Niobrara Formations.

 

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.  Pursuant to Rule 318A.j., Rule 318A. supersedes all prior Commission drilling and spacing orders affecting well location and density requirements of Greater Wattenberg Area wells.  Rule 318A.d. provides that an operator may allocate production to any drilling and spacing unit with respect to a particular Cretaceous Age Formation consistent with the provisions of Rule 318A. Section 28, Township 3 North, Range 68 West, 6th P.M. is subject to Rule 318A., for the production of oil, gas and associated hydrocarbons from Niobrara Formation.

 

7.     On November 2, 2011, Encana, by its attorneys, filed with the Commission a verified application for an order to establish an approximate 320-acre drilling and spacing unit for the below-listed lands (“Application Lands”), and approve up to two horizontal wells in addition to the drilled Frederiksen 1A-28H Well (API No. 05-123-33363), for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the permitted wellbore to be located no closer than 460 feet from the boundary of the unit, without exception being granted by the Director:

 

Township 3 North, Range 68 West, 6th P.M.

Section 28:       N˝

 

Encana states that this application is not requesting the change of any established 80-acre drilling and spacing units or the established distribution of proceeds for any existing vertical Niobrara Formation wells.  Encana will allocate and distribute proceeds from the horizontal well on a 320-acre basis.

 

8.     On January 9, 2012, Encana, 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.     Land testimony and exhibits submitted in support of the Application by Sheila Frazier, Senior Land Negotiator for Encana, showed that Encana holds 100 percent leasehold ownership interest in the Application Lands.

 

10.   Geologic testimony and exhibits submitted in support of the Application by Stacy M. Tincher, Geologist South Rockies for Encana, including a stratigraphic cross section constructed through nearby wells, indicates that the Niobrara Formation is generally of uniform thickness throughout the Application Lands, with total thickness ranging from approximately 240 feet to 250 feet.

 

11.   Engineering testimony and exhibits submitted in support of the Application by Sarah Fenton, Reservoir Engineer for Encana, showed that horizontal drilling is the most efficient way to drain the resource in the Niobrara Formation while minimizing surface disturbance, and will maximize recovery where drilled amongst vertical wells.  Testimony further showed that production of nearby wells will not be negatively impacted by pressure depletion, but that nearby existing vertical wells have benefitted from additional horizontal wells.

 

12.   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.

 

13.   The Application was reviewed by the Colorado Department of Public Health and Environment (“CDPHE”) pursuant to consultation provisions of Rule 306.d.  In a letter dated January 6, 2012, the CDPHE Oil & Gas Coordinator indicated that CDPHE does not believe any additional conditions of approval are necessary for approving the Application.

 

14.   Encana 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 establish an approximate 320-acre drilling and spacing unit for the N˝, Section 28, Township 3 North, Range 68 West, 6th P.M., and approve up to two horizontal wells in addition to the drilled Frederiksen 1A-28H Well (API No. 05-123-33363), for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

 

ORDER

 

NOW, THEREFORE IT IS ORDERED, that an approximate 320-acre drilling and spacing unit, is hereby established, for the below-listed lands, and up to two horizontal wells, are hereby approved, in addition to the drilled Frederiksen 1A-28H Well (API No. 05-123-33363), for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the permitted wellbore to be located no closer than 460 feet from the boundary of the unit, without exception being granted by the Director:

 

Township 3 North, Range 68 West, 6th P.M.

Section 28:       N˝

 

IT IS FURTHER ORDERED, that the established 80-acre drilling and spacing units and the established distribution of proceeds for any existing vertical wells in the Niobrara Formation are unaffected by this Order.

 

IT IS FURTHER ORDERED, that Encana will allocate and distribute proceeds from the horizontal well on a 320-acre basis.

 

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               26th       day of January, 2012, as of January 23, 2012.

           

                                                                        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

January 26, 2012