BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE APPLICATION OF GREAT WESTERN OIL & GAS COMPANY, LLC FOR AN
ORDER TO POOL ALL INTERESTS IN TWO APPROXIMATE 80-ACRE DESIGNATED WELLBORE
SPACING UNITS FOR SECTION 34, TOWNSHIP 7 NORTH, RANGE 67 WEST, 6TH
P.M., FOR THE CODELL-NIOBRARA FORMATION, NEW WINDSOR FIELD, WELD COUNTY,
COLORADO |
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CAUSE NO. 407
DOCKET NO. 1305-UP-86
ORDER NO. 407-792 |
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 1/2, Longmont, CO, upon application
for an order to pool all interests in two approximate 80-acre designated
wellbore spacing units established for Section 34, Township 7 North, Range 67
West, 6th P.M., to accommodate the JBL 34-43 Well and the JBL 34-44
Well, for the development and operation of the Codell-Niobrara Formation.
FINDINGS
The Commission finds as follows:
1.
Great Western Oil & Gas Company, LLC (“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, 1998, 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 7 North, Range 67 West, 6th P.M. is subject to Rule 318A for
the Codell-Niobrara Formation.
5.
On March 7, 2013, 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 interests in two approximate 80-acre designated
wellbore spacing units for the below-described lands (“Application Lands”) for
the development and operation of the Codell-Niobrara Formation, effective as of
the earlier of the date of this 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 JBL 34-43 Well (API No. 05-123-35267) and the JBL 34-44 Well (API No.
05-123-35265) (“Wells”) and to subject any nonconsenting interests to the cost
recovery provisions of C.R.S. §34-60-116(7):
Township 7 North, Range 67 West, 6th P.M.
Section 34:
E½ SE¼
(WSU #1 - JBL 34-43 Well)
Section 34:
E½ SE¼
(WSU #2 - JBL 34-44 Well)
6.
On April 22, 2013, WRCC, Inc. (“WRCC”), filed a timely Protest to the
Application (“Protest”), alleging that WRCC’s lease covering portions of the
Application Lands had expired and consequently, their interests should be
considered unleased. WRCC had no
objection to the pooling requested in Great Western’s Application.
7.
On April 23, 2013, Great Western, by its attorneys, filed with the
Commission a written request to approve the Application based on the merits of
the Application and the supporting exhibits.
Sworn written testimony and exhibits were submitted in support of the
Application.
8.
On April 24, 2013, a prehearing conference on the matter was held by the
Hearing Officer. Following the
prehearing conference, WRCC and Great Western resolved all issues to the Protest
and WRCC withdrew its Protest of the Application.
9.
Land testimony and exhibits submitted in support of the Application by
Wade Pollard, Land Manager for Great Western, showed that all nonconsenting
interest owners were notified of the Application and received and Authority for
Expenditure ("AFE") and offer to participate in the Wells. 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.
10. 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.
11.
Great Western agreed to be bound by oral order of the Commission.
12.
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 interests in the two
approximate 80-acre designated wellbore spacing units for Section 34, Township 7
North, Range 67 West, 6th P.M., to accommodate the JBL 34-43 Well and
the JBL 34-44 Well, for the development and operation of the Codell-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 two approximate 80-acre
designated wellbore spacing units established for the below-described lands, are
hereby pooled, for the development and operation of the Codell-Niobrara
Formation, 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 JBL 34-43 Well and the JBL 34-44 Well:
Township 7 North, Range 67 West, 6th P.M.
Section 34:
E½ SE¼
(WSU #1 - JBL 34-43 Well)
Section 34:
E½ SE¼
(WSU #2 - JBL 34-44 Well)
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 May,
2013, as of May 6, 2013.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By: _____________________________
Robert J. Frick, Secretary