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. 407-565

REPORT OF THE COMMISSION

The Commission heard this matter on March 5, 2012, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, upon application for an order to: 1) establish an approximate 320-acre wellbore spacing unit for Section 31, Township 3 North, Range 67 West, 6th P.M.; and 2) approve a horizontal well to accommodate the drilled Varra P31-76HN Well, for the production of oil, gas and associated hydrocarbons from 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 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 31, Township 3 North, Range 67 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 31, Township 3 North, Range 67 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 31, Township 3 North, Range 67 West, 6th P.M. is subject to Rule 318A., for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations.

7.         On January 5, 2012, Noble, by its attorneys, filed with the Commission a verified application (“Application”) for an order to: 1) establish an approximate 320-acre wellbore spacing unit for the below-described lands (“Application Lands”); and 2) approve one horizontal well to accommodate the drilled Varra P31-76HN Well, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations, with the treated interval of the permitted wellbore to be located no closer than 460 feet from the boundary of the unit, and surface locations consistent with Rule 318A., without exception being granted by the Director:

Township 3 North, Range 67 West, 6th P.M.
Section 31:       W½

Applicant confirmed it is not changing the established 80-acre drilling and spacing units for any existing vertical Codell-Niobrara Formation wells.  Applicant further confirmed it is not changing the established distribution of proceeds for any existing vertical Codell-Niobrara Formation wells subject to Order No. 407-87.  Applicant will allocate and distribute proceeds from the Well on an approximate 320-acre basis. 

8.         On February 21, 2012, 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.         Land testimony and exhibits submitted in support of the Application by Julie T. Jenkins, Land Manager for Noble, showed that Noble owns 100 percent of the leasehold interests in the Application Lands.  Noble has a valid surface use agreement to locate the Well outside of a designated drilling window and greater than 50 feet from an existing well under Rules 318A.a.(3) and 318A.c.(2).

10.        Geologic testimony and exhibits submitted in support of the Application by Ron Pritchett, Senior Geologist for Noble, including an analysis of cross-sections from Codell and Nobrara Formation wells located within the Application Lands, indicated that the Codell and Niobrara Formations are common sources of supply, and generally are of uniform thickness throughout the Application Lands.

11.        Engineering testimony and exhibits submitted in support of the Application by Ryan Sullivan, Engineering Team Lead for Noble, indicated the use of horizontal and vertical wells in Application Lands is necessary to increase the recovery of hydrocarbons from the reservoir to 6.5 percent. Testimony further indicated that infill horizontal and vertical wells will increase recovery from the reservoir, preventing waste and protecting correlative rights.

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

14.        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 wellbore spacing unit for Section 31, Township 3 North, Range 67 West, 6th P.M.; and approve a horizontal well to accommodate the drilled Varra P31-76HN Well, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations.

ORDER

NOW, THEREFORE IT IS ORDERED, that an approximate 320-acre wellbore spacing unit for the below-described lands, is hereby established, and a horizontal well to accommodate the drilled Varra P31-76HN Well (API No. 05-123-33668), is hereby approved, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations:

Township 3 North, Range 67 West, 6th P.M.
Section 31:       W½

IT IS FURTHER ORDERED, this order does not change the established 80-acre drilling and spacing units for any existing vertical Codell or Niobrara Formation wells or the established distribution of proceeds for any existing vertical Codell or Niobrara Formation wells subject to Order No. 407-87.  Proceeds from the Well shall be allocated and distributed on an approximate 320-acre basis. 

IT IS FURTHER ORDERED, that the treated interval of the wellbore for the Varra P31-76HN Well shall be no closer than 460 feet from the unit boundaries.

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   8th  day of March, 2012, as of March 5, 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
March 8, 2012