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. 407-644
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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 160-acre designated wellbore spacing unit for
Section 17, Township 4 North, Range 66 West, 6th P.M., to accommodate
the Owens K17-23D Well,
and all other
wells, 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 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, gas and associated hydrocarbons from
the Codell Formation, 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 17,
Township 4 North, Range 66 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, gas and associated hydrocarbons from
the Codell and Niobrara Formations, with the permitted well locations in
accordance with the provisions of Order No. 407-1. Section 17, Township 4 North, Range
66 West, 6th P.M. is subject to this Order for the Codell-Niobrara
Formation.
6.
On April 27, 1998, the Commission adopted Rule 318A., the Greater
Wattenberg Well Location Rule (“GWA Rule”), 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. Section 17, Township 4
North, Range 66 West, 6th P.M. is subject to Rule 318A., for the
production of oil, gas and associated hydrocarbons from the Codell-Niobrara
Formation.
7.
On March 27, 2012, Noble, by its attorneys, filed with the Commission a
verified application (“Application”) for an order to pool all interests in an
approximate 160-acre designated wellbore spacing unit for the below-described
lands (“Application Lands”) to accommodate the Owens K17-23D Well (API No.
05-123-30799) (“Well”), 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 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 4 North, Range 66 West, 6th P.M.
Section 17: SE¼
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.
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 160-acre designated wellbore spacing unit for
Section 17, Township 4 North, Range 66 West, 6th P.M., to accommodate
the Owens K17-23D 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 160-acre designated
wellbore spacing unit established 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
Owens K17-23D Well:
Township 4 North, Range 66 West, 6th P.M.
Section 17: SE¼
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 wellbore spacing unit described above, shall be considered a drilling and
spacing unit established by the Commission for purposes of Rule 530.a.
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