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. 232 & 407
ORDER NO. 232-344 & 407-684
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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 in an approximate
160-acre designated wellbore spacing unit established for
Sections 8 and 17, Township 3 North, Range 65 West, 6th P.M., to
accommodate the drilling of the REI H17-28D
Well, for the development and
operation of the J Sand and Codell-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 October 19, 1981, the Commission issued Order No. 232-23 which, among
other things, amended Order No. 232-20, approved up to two wells within each
unit, and included additional lands within the Wattenberg Gas Spaced Area,
located in Adams and Weld Counties, for the production of gas from the J Sand
Formation, with the additional well to be located in the undrilled quarter
quarter section at a location no closer than 990 feet to the boundaries of the
quarter section. Sections 8 and 17,
Township 3 North, Range 65 West, 6th P.M. are subject to this Order
for the J Sand Formation.
5.
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 8 and 17,
Township 3 North, Range 65 West, 6th P.M. are subject to this Order
for the Codell Formation.
6.
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 8 and 17, Township 3 North,
Range 65 West, 6th P.M. are subject to this Order for the
Codell-Niobrara Formation.
7.
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 to, among other things 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 8 and 17, Township 3 North, Range 65 West, 6th
P.M. are subject to Rule 318A for the Codell-Niobrara Formation.
8.
On June 21, 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 pool all interests within an
approximate 160-acre designated wellbore spacing unit for the below-described
lands (“Application Lands”), to accommodate the REI H17-28D Well (API No. 05-123-35343)
(“Well”), for the development and operation
of the J Sand and Codell-Niobrara Formations, effective as of the earlier of the date 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 REI H17-28D
Well, and to subject any non-consenting
interests to the cost recovery provisions of C.R.S. § 34-60-116(7):
Township 3 North, Range 65 West, 6th P.M.
Section 8:
SE¼ SW¼, SW¼ SE¼
Section 17: NW¼
NE¼, NE¼ NW¼
9.
On August 7, 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.
10.
Land 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 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.
11. 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.
12.
Noble agreed to be bound by oral order of the Commission.
13.
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 established for
Sections 8 and 17, Township 3 North, Range
65 West, 6th P.M., to accommodate the drilling of the REI
H17-28D Well, for the development and
operation of the J Sand and Codell-Niobrara
Formations.
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, to accommodate the drilling of the REI H17-28D
Well, for the development and
operation of the J Sand and Codell-Niobrara
Formations, 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 Well:
Township 3 North, Range 65 West, 6th P.M.
Section 8:
SE¼ SW¼, SW¼ SE¼
Section 17: NW¼
NE¼, NE¼ NW¼
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
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