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 TO CONFIRM A 320-ACRE WELLBORE SPACING UNIT AND TO POOL ALL
INTERESTS IN AN APPROXIMATE 320-ACRE DESIGNATED WELLBORE SPACING UNIT FOR THE E½
OF SECTION 34, TOWNSHIP 5 NORTH, RANGE 63 WEST, 6TH P.M., FOR THE
NIOBRARA FORMATION, WATTENBERG FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 407
DOCKET NO. 1303-UP-73
ORDER NO. 407-776 |
REPORT OF THE COMMISSION
The Commission heard this matter on March 25, 2013, at the offices of the
Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver,
Colorado, upon application for an order to confirm an approximate 320-acre
designated wellbore spacing unit established for the E½ of Section 34, Township
5 North, Range 63 West, 6th P.M., and to pool all nonconsenting
interests in an approximate 320-acre designated wellbore spacing unit
established for the E½ of Section 34, Township 5 North, Range 63 West, 6th
P.M., to accommodate the North Platte P-T-34HZ Well, for the development and
production of the Niobrara Formation.
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 Niobrara Formation.
5.
On January 21, 2013, Bonanza, by its attorneys, filed with the Commission
pursuant to §34-60-116 C.R.S., a verified application (“Application”) for an
order to: 1) confirm an approximate 320-acre designated wellbore spacing unit
established for the below-described lands (“Application Lands”), and approve one horizontal well within
the unit, for the production of oil, gas and associated hydrocarbons from the
Niobrara Formation, with the treated interval of the permitted wellbore to be
located no closer than 460 feet from the unit boundaries, without exception
being granted by the Director; and 2) pool all nonconsenting interests in the
Application Lands, for the development and operation of the 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 to accommodate the drilling of the
North Platte P-T-34HZ Well (API No. 05-123-35968) (“Well”), and to subject any
nonconsenting 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:
E½
6.
On March 12, 2013, Bonanza, 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
Jared Rush, Landman for Bonanza, showed that all nonconsenting interest owners
were notified of the Application and received an 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 March 25, 2013
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 Hearing Officer review of the Application under Rule
511., the Commission should enter an order to confirm an approximate 320-acre
designated wellbore spacing unit established for the E½ of Section 34, Township
5 North, Range 63 West, 6th P.M., and pool all nonconsenting
interests in an approximate 320-acre designated wellbore spacing unit
established for the E½ of Section 34, Township 5 North, Range 63 West, 6th
P.M., to accommodate the North Platte P-T-34HZ Well, for the development and
production of the Niobrara Formation.
ORDER
NOW, THEREFORE IT IS ORDERED, that an approximate 320-acre designated wellbore
spacing unit established for the E½ of Section 34, Township 5 North, Range 63
West, 6th P.M., is hereby confirmed, and one horizontal well within
the unit, is hereby approved, for the production of oil, gas and associated
hydrocarbons from the Niobrara Formation, with the treated interval of the
permitted wellbore to be located no closer than 460 feet from the unit
boundaries, without exception being granted by the Director.
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 nonconsenting interests in an approximate 320-acre
designated wellbore spacing unit established for the below-described lands, are
hereby pooled, for the development and production of the 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) are first incurred for the
drilling of the North Platte P-T-34HZ Well:
Township
5 North, Range 63 West, 6th P.M.
Section 34:
E½
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
5th day
of April, 2013, as of March 25, 2013.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary