BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE APPLICATION OF PDC ENERGY, INC. FOR AN ORDER VACATING
FOUR APPROXIMATE 80-ACRE DESIGNATED DRILLING AND SPACING UNITS POOLED BY ORDER
NO. 407-656, AND REPOOLING ALL INTERESTS IN FOUR MODIFIED APPROXIMATE 80-ACRE
LAYDOWN DRILLING AND SPACING UNITS LOCATED IN SECTION 10, TOWNSHIP 4 NORTH,
RANGE 67 WEST, 6TH P.M., FOR THE CODELL AND NIOBRARA FORMATIONS,
WATTENBERG FIELD, WELD COUNTY, COLORADO |
)
)
)
)
)
)
)
)
)
)
) |
CAUSE NO. 407
DOCKET NO. 1301-UP-22
ORDER NO. 407-745
|
REPORT OF THE COMMISSION
The Commission heard this matter on January 7, 2013, at the
Sheraton Denver Downtown Hotel, 1550 Court Place,
Denver, Colorado, upon application for an order to:
1) vacate four (of five) approximate
80-acre standup designated drilling and spacing units pooled by Order 407-656
for Section 10, Township 4 North, Range 67 West, 6th P.M., and 2)
repool all interests in four approximate 80-acre laydown designated drilling and
spacing units established for Section 10, Township 4 North, Range 67 West, 6th
P.M., to accommodate the Binder
22-10D U Well, Binder 11-10D U Well, Binder 12-10D U Well and the Binder 21-10D U Well
for the development and operation of the
Codell and Niobrara Formations.
FINDINGS
The Commission finds as follows:
1.
PDC Energy, Inc. (“PDC” 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 entered 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 10,
Township 4 North, Range 67 West, 6th P.M. is subject to this Order
for the Codell Formation.
5.
On February 19, 1992, the Commission entered 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 10, Township 4 North, Range
67 West, 6th P.M., is subject to this Order for the Codell and
Niobrara Formations.
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. Section 10, Township 4 North, Range
67 West, 6th P.M. is subject to Rule 318A for the Codell and Niobrara
Formations.
7.
On June 4, 2012, the
Commission entered Order No. 407-656 which, among other things, pooled all
interests in four approximate 80-acre standup designated wellbore spacing units[1]
to accommodate the Binder 22-10D U Well, Binder 11-10D U Well, Binder 12-10D U
Well and the Binder 21-10D U Well, for the development and operation of the
Codell and Niobrara Formations.
Section 10, Township 4 North, Range 67 West,
6th P.M. is subject to this Order
for the Codell and Niobrara Formations.
8.
On November 2, 2012, PDC, by its attorneys, filed with the
Commission pursuant to §34-60-116 C.R.S., a verified application
(“Application”) for an order to:
1)
vacate four (of five) approximate
80-acre standup designated drilling and spacing units pooled by Order No.
407-656 with respect to the below-described lands:
Township 4 North, Range 67 West, 6th P.M.
Section 10: E½ NW¼
(Binder 22-10D U
– DSU #1)
Section 10: W½ NW¼
(Binder 11-10D U
– DSU #2)
Section 10: W½ NW¼
(Binder 12-10D U
– DSU #3)
Section 10: E½ NW¼
(Binder 21-10D U
– DSU #5);
The drilling and spacing unit established by Order 407-656 for the Binder 32-10
D U Well (API No. 05-123-31148) is unaffected by this Application:
Township 4 North, Range 67 West, 6th P.M.
Section 10: W½ NE¼
(Binder 32-10D U
– DSU #6);
2) repool all interests in four approximate 80-acre laydown designated
drilling and spacing units established for the below-described lands
(“Application Lands”), 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 each respective well: the Binder 22-10D U Well
(API No.
05-123-31149), Binder 11-10D U Well
(API No.
05-123-31515), Binder 12-10D U Well
(API No.
05-123-31519) and the Binder 21-10D U
Well (API No.
05-123-32494) (“Wells”), and to
subject any nonconsenting interests to the cost recovery provisions of C.R.S.
§ 34-60-116(7):
Township 4 North, Range 67 West, 6th P.M.
Section 10: S½NW¼
(Binder 22-10D U
– DSU #1)
Section 10: N½NW¼
(Binder 11-10D U
– DSU #2)
Section 10: S½NW¼
(Binder 12-10D U
– DSU #3)
Section 10: N½NW¼
(Binder 21-10D U
– DSU #5)
9.
On December 19, 2012, PDC, 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 byJohn
Krattenmaker, Senior Regional Landman for PDC, showed that all nonconsenting
interest owners were notified of the Application and received and Authority for
Expenditure ("AFE") and 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 January 7, 2013 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. PDC
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 Hearings Officer review of the Application under Rule
511., the Commission should enter an order to:
1) vacate four (of five) approximate
80-acre standup designated drilling and spacing units pooled by Order 407-656
for Section 10, Township 4 North, Range 67 West, 6th P.M., and 2)
repool all interests in four approximate 80-acre laydown designated drilling and
spacing units established for Section 10, Township 4 North, Range 67 West, 6th
P.M., to accommodate the Binder
22-10D U Well, Binder 11-10D U Well, Binder 12-10D U Well and the Binder 21-10D U Well,
for the development and operation of the
Codell and Niobrara Formations.
ORDER
NOW, THEREFORE IT IS ORDERED, that four (of five) approximate 80-acre standup
designated drilling and spacing units pooled by Order No. 407-656 with respect
to the below-described lands, are hereby vacated:
Township 4 North, Range 67 West, 6th P.M.
Section 10: E½ NW¼
(Binder 22-10D U
– DSU #1)
Section 10: W½ NW¼
(Binder 11-10D U
– DSU #2)
Section 10: W½ NW¼
(Binder 12-10D U
– DSU #3)
Section 10: E½ NW¼
(Binder 21-10D U
– DSU #5);
IT IS FURTHER ORDERED, that the drilling and spacing unit established by
Order 407-656 for the Binder 32-10 D U Well is unaffected by this Application:
Township 4 North, Range 67 West, 6th P.M.
Section 10: W½ NE¼
(Binder 32-10D U
– DSU #6)
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 four approximate 80-acre laydown
designated drilling and spacing units established for the below-described lands,
are hereby pooled, 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) are first
incurred for the drilling of the
Binder 22-10D U Well, Binder 11-10D U Well, Binder 12-10D U Well and the Binder 21-10D U Well:
Township 4 North, Range 67 West, 6th P.M.
Section 10: S½NW¼
(Binder 22-10D U
– WSU #1)
Section 10: N½NW¼
(Binder 11-10D U
– WSU #2)
Section 10: S½NW¼
(Binder 12-10D U
– WSU #3)
Section 10: N½NW¼
(Binder 21-10D U
– WSU #5)
2.
The production obtained from the drilling and 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 drilling and spacing unit; each owner of an interest in the drilling and
spacing unit shall be entitled to receive its share of the production of the
Well located on the drilling and spacing unit applicable to its interest in the
drilling and 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 drilling and 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 drilling and 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 drilling and
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 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 January, 2013, as of January 7, 2013.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary
[1]
Order 407-656 incorrectly identified the drilling and spacing units as
“designated wellbore spacing units”.