BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
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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. 407-680
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REPORT OF THE COMMISSION
The Commission heard this matter on August 20, 2012, at the offices of the
Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver,
Colorado, upon application for an order to pool all interests within
eight approximate 200 to 640-acre designated wellbore spacing units, for
Sections 11 through 15 and 23, Township 2 North, Range 65 West, 6th
P.M., to accommodate the drilling of eight horizontal wells, for the
development and operation of
the Codell-Niobrara Formation.
FINDINGS
The Commission finds as follows:
1.
Kerr-McGee Oil & Gas Onshore LP
(“Kerr-McGee” 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.
Sections 10 through 15 and 23, Township 2 North, Range 65 West, 6th
P.M. are 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. Sections 10 through 15 and 23,
Township 2 North, Range 65 West, 6th P.M. are subject to this Order
for the Codell-Niobrara Formation.
6.
On April 27, 1988, 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 Cretaceous
Age Formations from the base of the Dakota Formation to the surface. Rule 318A.
supersedes all prior Commission drilling and spacing orders affecting well
location and density requirements of Greater Wattenberg Area wells.
On December 5, 2005, Rule 318A was amended, among other things, to allow
interior infill and boundary wells to be drilled and wellbore spacing units to
be established. On August 8, 2011, Rule 318A was again amended, among
other things, to address drilling of horizontal wells. Sections 10 through 15 and 23,
Township 2 North, Range 65 West, 6th P.M. are subject to Rule 318A
for the Codell-Niobrara Formation.
7.
On June 21, 2012, Kerr-McGee, by its attorneys, filed with the Commission
a verified application (“Application”) for an order to pool all interests within
eight approximate 200 to 640-acre designated wellbore spacing units (“WSU”) for
the below-described lands (“Application Lands”) to accommodate the Weichel
13N-11HZ Well (API No. 05-123-35283), the Weichel 14N-11HZ Well (API No.
05-123-35149), the Weichel 26N-11HZ Well (API No. 05-123-35355), the Weichel
26N-15HZ Well (API No. 05-123-35284), the Weichel 28N-11HZ Well (API No.
05-123-35158), the Weichel 30N-23HZ Well (API No. 05-123-35359), the Weichel
34C-11HZ Well (API No. 05-123-35285) and the Weichel 35N-11HZ Well (API No.
05-123-35282) (“Wells”), 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 each respective
Well, and to subject any nonconsenting interests to the cost recovery provisions
of C.R.S. § 34-60-116(7):
Township 2 North, Range 65 West, 6th P.M.
Section 11: SW¼ SW¼
Weichel 13N-11HZ Well
Section 14: W½ W½
(WSU #1 – 200 acres)
Township 2 North, Range 65 West, 6th P.M.
Section 11: SE¼ SW¼
Weichel 14N-11HZ Well
Section 14: E½ W½
(WSU #2 – 200 acres)
Township 2 North, Range 65 West, 6th P.M.
Section 11: E½ E½
Section 12: W½ W½
Section 13: W½ W½
Weichel 26N-11HZ Well
Section 14: E½ E½
(WSU #3 – 640 acres)
Township 2 North, Range 65 West, 6th P.M.
Section 14: W½ W½
Weichel 26N-15HZ Well
Section 15: E½ E½
(WSU #4 – 320 acres)
Township 2 North, Range 65 West, 6th P.M.
Section 11: E½ W½, W½ E½
Weichel 28N-11HZ Well
Section 14: E½ W½, W½ E½
(WSU #5 – 640 acres)
Township 2 North, Range 65 West, 6th P.M.
Section 14: S½ S½
Weichel 30N-23HZ Well
Section 23: N½ N½
(WSU #6 – 320 acres)
Township 2 North, Range 65 West, 6th P.M.
Section 10: SE½ SE½
Section 11: SW½ SW½
Section 14: W½ W½
Weichel 34C-11HZ Well
Section 15: E½ E½
(WSU #7 – 400 acres)
Township 2 North, Range 65 West, 6th P.M.
Section 11: S½ SW¼
Weichel 35N-11HZ Well
Section 14: W½
(WSU #8 – 400 acres)
7.
On August 7, 2012, Kerr-McGee,
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.
8.
Land testimony and exhibits submitted in support of the Application by
R.C. Kimball, Staff Landman for Kerr-McGee, 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 Wells. 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 and operation and was received at
least 30 days prior to the August 20, 2012 hearing date.
9.
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.
10.
Kerr-McGee
agreed to be bound by oral order of the Commission.
11.
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 within
eight approximate 200 to 640-acre designated
wellbore spacing units, for Sections
11 through 15 and 23, Township 2 North, Range 65 West, 6th P.M., to
accommodate the drilling of eight horizontal wells, 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 each of eight approximate 200 to
640-acre designated wellbore spacing units established for the below-described
lands, are hereby pooled, to accommodate the drilling of eight horizontal wells,
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 each respective
Well:
Township 2 North, Range 65 West, 6th P.M.
Section 11: SW¼ SW¼
Weichel 13N-11HZ Well
Section 14: W½ W½
(WSU #1 – 200 acres)
Township 2 North, Range 65 West, 6th P.M.
Section 11: SE¼ SW¼
Weichel 14N-11HZ Well
Section 14: E½ W½
(WSU #2 – 200 acres)
Township 2 North, Range 65 West, 6th P.M.
Section 11: E½ E½
Section 12: W½ W½
Section 13: W½ W½
Weichel 26N-11HZ Well
Section 14: E½ E½
(WSU #3 – 640 acres)
Township 2 North, Range 65 West, 6th P.M.
Section 14: W½ W½
Weichel 26N-15HZ Well
Section 15: E½ E½
(WSU #4 – 320 acres)
Township 2 North, Range 65 West, 6th P.M.
Section 11: E½ W½, W½ E½
Weichel 28N-11HZ Well
Section 14: E½ W½, W½ E½
(WSU #5 – 640 acres)
Township 2 North, Range 65 West, 6th P.M.
Section 14: S½ S½
Weichel 30N-23HZ Well
Section 23: N½ N½
(WSU #6 – 320 acres)
Township 2 North, Range 65 West, 6th P.M.
Section 10: SE½ SE½
Section 11: SW½ SW½
Section 14: W½ W½
Weichel 34C-11HZ Well
Section 15: E½ E½
(WSU #7 – 400 acres)
Township 2 North, Range 65 West, 6th P.M.
Section 11: S½ SW¼
Weichel 35N-11HZ Well
Section 14: W½
(WSU #8 – 400 acres)
2.
The production obtained from the wellbore spacing units 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 units; each owner of an interest in the wellbore spacing
units shall be entitled to receive its share of the production of the Well
located on the wellbore spacing units applicable to its interest in the wellbore
spacing units.
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 units
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 units 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
units 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 units 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
day of August, 2012, as of
August 20, 2012.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary
Dated: August 30, 2012