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 NOS. 232 & 407
ORDER NOS. 232-328 & 407-630
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REPORT OF THE COMMISSION
The Commission heard this matter on May 29, 2012, in Suite 801, The Chancery
Building, 1120 Lincoln Street, Denver, Colorado, upon application for an
order to pool all interests in an
approximate 80-acre drilling and spacing unit for Section 12, Township 7
North, Range 64 West, 6th P.M., to accommodate the Walcker AB12-08
Well, for the development and operation of
the Codell-Niobrara Formation.
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 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.
Rule 318A (a)(4)(C) allows an operator to designate a drilling and spacing unit
not smaller than a governmental quarter-quarter section if the well is proposed
to be located greater than four hundred and sixty (460) feet from the quarter
quarter section boundary in which it is located.
Pursuant to Rule 318A.k., Rule 318A supersedes all prior Commission
drilling and spacing orders affecting well location and density requirements of
Greater Wattenberg Area wells. Section 12, Township 7 North, Range 64 West, 6th
P.M. is subject to Rule 318A., for the production of oil, gas and
associated hydrocarbons from the J Sand and
Codell-Niobrara Formation.
5.
On February 16, 2012, Noble,
by its attorneys, filed with the Commission a verified application (“Concurrent
Application”), Docket No. 1204-SP-47, seeking to establish an approximate
80-acre drilling and spacing unit for the
Codell-Niobrara Formation and an approximate 160-acre drilling and
spacing unit for the J Sand Formation in Section 12, Township 7 North, Range 64
West, 6th P.M., for the
production of oil, gas and associated hydrocarbons from the J Sand and Codell-Niobrara
Formation.
6.
On February 16, 2012, Noble, by its attorneys, filed with the Commission
pursuant to § 34-60-116 C.R.S., a verified application (“Application”) for an
order to: (1) pool all interests in an approximate 80-acre drilling and spacing
unit for the below-described lands (“Application Lands”), for the development
and operation of the Codell and Niobrara Formations (“DSU #1”); and (2) pool all
interests in an approximate 160-acre drilling and spacing unit for the
below-described lands (“Application Lands”), for the development and operation
of the J Sand Formation (“DSU #2”), to accommodate the Walcker AB12-08 Well (API
No. 05-123-34272), effective as of the earlier of the date of the Application,
or the date that any of the costs specified in C.R.S. § 34-60-116(7)(b)(II) were
first incurred for the drilling of the well, and to subject any nonconsenting
interests to the cost recovery provisions of C.R.S. § 34-60-116(7):
Township 7 North, Range 64 West, 6th P.M.
Section 12:
E½ NE¼
(80-acre – Codell / Niobrara – “DSU
#1”)
Township 7 North, Range 64 West, 6th P.M
Section 12:
NE¼
(160-acre – J Sand – “DSU #2”)
This Application is contingent on the approval of Docket No. 1204-SP-47.
7.
On March 30, 2012, Noble requested, and Commission Staff granted, a
continuance to the May 29, 2012 hearing.
8.
On May 15, 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.
Testimony and exhibits submitted in support of the Application by Joseph
H. 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 an offer to participate in the Well. Further testimony concluded that the
AFE sent by the 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 May 29, 2012 hearing date. Further testimony withdrew the 160-acre J Sand
Formation drilling and spacing unit
from the Application Lands.
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 hydrocarbons, 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
to pool all interests in an approximate 80-acre drilling and spacing unit for
Section 12, Township 7 North, Range 64 West, 6th P.M., to
accommodate the Walcker AB12-08 Well, for
the development and operation of the Codell-Niobrara Formation.
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 interests in
an approximate 80-acre designated wellbore spacing unit for the below-described
lands, are hereby pooled, for the development and operation of the Codell-Niobrara
Formation, effective as of the earlier of the date of the Application, or the
date that the costs specified in C.R.S. §34-60-116(7)(b)(II) are first incurred
for the drilling of the Walcker AB12-08 Well.
Township 7 North, Range 64 West, 6th P.M.
Section 12:
E½ 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 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
4th
day of June, 2012, as of May 29,
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
June 4, 2012