BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE APPLICATION OF BONANZA
CREEK ENERGY OPERATING COMPANY LLC FOR AN ORDER CONFIRMING A 40-ACRE WELLBORE
SPACING UNIT FOR THE J SAND, CODELL AND NIOBRARA FORMATIONS, AND POOLING ALL
INTERESTS IN THE UNIT, WATTENBERG FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 407
ORDER NO. 407-708 DOCKET NO. 1208-UP-20 CORRECTED |
REPORT OF THE COMMISSION
The Commission heard this matter on October 1, 2012, at the Routt County Justice
Center, 1955 Shield Drive, Steamboat Springs, Colorado, upon application for an
order to: 1) confirm an approximate 40-acre designated wellbore spacing unit
established for Section 34, Township 5 North, Range 63 West, 6th
P.M.; and 2) pool all interests in the designated wellbore spacing unit, to
accommodate the North Platte 42-34
Well, for the development and operation of the J Sand, Codell and Niobrara
Formations.
FINDINGS
The Commission finds as follows:
1.
Bonanza Creek Energy Operating
Company LLC (“Bonanza” 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 34, Township 5
North, Range 63 West, 6th P.M.
is
subject to Rule 318A for the J Sand, Codell and Niobrara Formations.
5.
On June 21, 2012 (amended July 27, 2012), Bonanza, by its attorneys, filed with
the Commission pursuant to § 34-60-116 C.R.S., a verified amended application
(“Amended Application”) for an order to: 1) confirm an approximate 40-acre
wellbore spacing unit designated by the operator pursuant to Rule
318A(I)(a)(4)(D) for the below-described lands (“Application Lands”), for the
production of oil, gas and associated hydrocarbons from the J Sand, Codell and
Niobrara Formations, with the treated interval of the permitted wellbore to be
located no closer than 460 feet from the boundaries of the proposed unit,
without exception being granted by the Director; and 2) pool all interests in
the Application Lands,
to accommodate the North Platte 42-34 Well (API No. 05-123-35676)
(“Well”),
for the development and operation of the J Sand, 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 non-consenting interests to the
cost recovery provisions of C.R.S. § 34-60-116(7):
Township 5 North, Range 63 West, 6th P.M.
Section 34:
SE¼ NE¼
6.
On September 18, 2012, Bonanza, by its attorneys, filed with the
Commission a written request to approve the Amended 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 Amended
Application by Jared Rush, Landman for the Rocky Mountain Region for Bonanza,
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 North Platte 42-34 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 October 1, 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.
Bonanza 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 Hearings Officer review of the Application under Rule
511., the Commission should enter an order to: 1) confirm an approximate 40-acre
designated wellbore spacing unit established for Section 34, Township 5 North,
Range 63 West, 6th P.M.; and 2) pool all interests in the designated
wellbore spacing unit, to accommodate the
North Platte 42-34 Well, for the development and operation of the J Sand,
Codell and Niobrara Formations.
ORDER
NOW, THEREFORE IT IS ORDERED, that an approximate 40-acre designated wellbore
spacing unit established for the below-described lands, is hereby confirmed, for
the production of oil, gas and associated hydrocarbons from the J Sand, Codell
and Niobrara Formations, with the treated interval of the permitted wellbore to
be located no closer than 460 feet from the boundaries of the proposed unit,
without exception being granted by the Director:
Township 5 North, Range 63 West, 6th P.M.
Section 34:
SE¼ NE¼
IT IS FURTHER 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 40-acre designated
wellbore spacing unit established for the below-described lands, are hereby
pooled, for the development and operation of the J Sand, 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 North Platte 42-34
Well:
Township 5 North, Range 63 West, 6th P.M.
Section 34:
SE¼ 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 designated 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 designated 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 designated 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 17th day of October, 2012, as of
October 1, 2012.
CORRECTED this 31st day of October, 2012, as of OCtober 1, 2012.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary