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. 407-696
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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 nonconsenting interests in an approximate
160-acre designated wellbore spacing unit established for Section 33, Township 7
North, Range 65 West, 6th P.M.,
to
accommodate the Lamb 33-53 Well, for
the development and operation of
the Codell and Niobrara Formations.
FINDINGS
The
Commission finds as follows:
1.
Great Western Oil and Gas Company (“Great Western” 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, 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. Section 33, Township 7
North, Range 65 West, 6th P.M. is
subject to Rule 318A for the Codell and Niobrara Formations.
5.
On
June 21, 2012, Great Western, 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 nonconsenting interests in an approximate 160-acre designated
wellbore spacing unit for the below-described lands (“Application Lands”),
to
accommodate the Lamb 33-53 Well (API No. 05-123-33000) (“Well”),
for the development and operation of the Codell and Niobrara Formations,
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 65 West, 6th P.M.
Section 33: SW¼
6.
On August 9, 2012,
Great Western, 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.
7.
Land testimony and exhibits submitted in support of the Application by K.
Wade Pollard, Land Manager for Great Western, 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 and operation and was received at
least 30 days prior to the August 20, 2012 hearing date.
8.
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.
9.
Great Western agreed to be bound by oral order of
the Commission.
10. 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 nonconsenting interests in an approximate 160-acre designated
wellbore spacing unit established for Section 33, Township 7 North, Range 65
West, 6th P.M.,
to accommodate the Lamb 33-53 Well,
for
the development and operation of
the Codell
and 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 nonconsenting
interests in an approximate 160-acre designated wellbore spacing unit
established for the below-described lands, are hereby pooled,
to
accommodate the Lamb 33-53 Well, for
the development and operation of the Codell and 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 7 North, Range 65 West, 6th P.M.
Section 33: SW¼
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