BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE APPLICATION OF CONDOR ENERGY TECHNOLOGY LLC FOR AN
ORDER TO POOL ALL INTERESTS IN AN APPROXIMATE 640-ACRE DRILLING AND SPACING UNIT
ESTABLISHED FOR SECTION 32, TOWNSHIP 7 NORTH, RANGE 60 WEST, 6TH
P.M., FOR THE NIOBRARA FORMATION,
UNNAMED FIELD, WELD COUNTY, COLORADO |
)
)
)
)
)
)
) |
CAUSE NOS. 407 & 535
DOCKET NO. 1305-UP-81
ORDER NOS. 407-787 & 535-334 |
REPORT OF THE COMMISSION
The Commission heard this matter on May 6, 2013, at the Weld County Southwest
Services Complex, 4209 Weld County Road 24 ½, Longmont, Colorado, upon
application for an order to pool all interests in an approximate 640-acre
exploratory drilling and spacing unit established for Section 32, Township 7
North, Range 60 West, 6th P.M., to accommodate the Kuhn 32-1H Well,
for the development and operation of the Niobrara Formation.
FINDINGS
The Commission finds as follows:
1.
Condor Energy Technology, LLC (“Condor” 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 May 29, 2012, the Commission entered Order No. 407-642 / 535-163
which, among other things, established six approximate 640 to 1280-acre drilling
and spacing units, and approved up to four horizontal wells within each unit,
for the production of oil, gas and associated hydrocarbons from the Niobrara
Formation. Section 32, Township 7
North, Range 60 West, 6th P.M. is subject to this Order for the
Niobrara Formation.
5.
On March 7, 2013, Condor, 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 in an approximate
640-acre drilling and spacing unit
established for the below-described lands (“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 for the drilling of
the Kuhn 32-1H Well (“Well”), and the three additional wells approved by Order
Nos. 407-642 / 535-163, and to subject any nonconsenting interests to the cost
recovery provisions of C.R.S. §34-60-116(7):
Township 7 North, Range 60 West, 6th
P.M.
6.
On April 23, 2013, Prima Exploration Inc. (“Prima” or “Protestant”),
filed a Protest to the Application
objecting to Condor’s request to pool all subsequent wells, and requests the
Commission only pool wells on a well-by-well basis, pursuant to §34-60116(7).
7.
On April 26, 2013, a Prehearing Conference was held at the offices of the
COGCC.
8.
On May 1, 2013, Prima withdrew its Protest of the Application.
9.
On May 2, 2013, Condor, 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 Sean
Fitzgerald, Engineering and Land Manager of South Texas Reservoir Alliance LLC
for Condor, 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 May 6, 2013 hearing
date.
11.
Land testimony and exhibits supported pooling of the Kuhn 32-1H Well only.
12. 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.
13.
Condor agreed to be bound by oral order of the Commission.
14.
Based on the facts stated in the verified Application, having resolved all
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 640-acre exploratory drilling and spacing unit established for
Section 32, Township 7 North, Range 60 West, 6th P.M., to accommodate
the Kuhn 32-1H Well, for the development and operation of the Niobrara
Formation.
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 the approximate 640-acre exploratory
drilling and spacing unit established for the below-described lands, are hereby
pooled, 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) are first incurred for the
drilling of the Kuhn 32-1H Well:
Township 7 North, Range 60 West, 6th P.M.
Section 32:
All
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 May, 2013, as of May 6, 2013.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary