BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE APPLICATION OF GREAT WESTERN OPERATING COMPANY, LLC FOR AN
ORDER TO POOL ALL INTERESTS IN FOUR APPROXIMATE 160-ACRE DESIGNATED WELLBORE
SPACING UNITS ESTABLISHED FOR SECTIONS 19, 20, 29 AND 30, TOWNSHIP 5 NORTH,
RANGE 63 WEST, 6TH P.M. FOR THE CODELL-NIOBRARA FORMATION, WATTENBERG
FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 407
DOCKET NO. 1307-UP-138
ORDER NO. 407-839 |
REPORT OF THE COMMISSION
The Commission heard this matter on July 29, 2013, at offices of the Colorado
Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon
application for an order to pool all interests in four approximate 160-acre
designated wellbore spacing units established for Sections 19, 20, 29 and 33,
Township 5 North, Range 63 West, 6th P.M., to accommodate the
Peterson CX GH 30-26D Well, the Peterson CX GH 30-27D Well, the Peterson CX GH
30-28D Well and the Peterson CX GH 30-40D Well, for the development and
operation of the Codell-Niobrara Formation.
FINDINGS
The Commission finds as follows:
1.
Great Western Operating 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 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. Sections 19, 20,
29 and 33, Township 5 North, Range 63 West, 6th P.M. are 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. Sections 19, 20, 29 and 33, Township
5 North, Range 63 West, 6th P.M. are subject to this Order for the
Codell-Niobrara Formation.
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. Sections 19, 20, 29 and 33, Township
5 North, Range 63 West, 6th P.M. are subject to Rule 318A for the
Codell-Niobrara Formation.
7.
On May 30, 2013, Great Western, by its attorneys, filed with the
Commission pursuant to C.R.S. §34-60-116, a verified application (“Application”)
for an order to pool all interests in four approximate 160-acre designated
wellbore spacing unit established 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 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 Peterson CX GH 30-26D Well (API No. 05-123-36151), the
Peterson CX GH 30-27D Well (API No. 05-123- 36143), the Peterson CX GH 30-28D
Well (API No. 05-123- 36170) and the Peterson CX GH 30-40D Well (API No. 05-123-
36152) (“Wells”), 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 19: SE¼ SE¼
Section 20: SW¼ SW¼
Section 29: NW¼ NW¼
Section 30: NE¼ NE¼
(WSU #1 - Peterson CX GH 30-26D)
Section 19: S½ SE¼
Section 30: N½ NE¼
(WSU #2 - Peterson CX GH 30-27D)
Section 19: SW¼ SE¼, SE¼ SW¼
Section 30: NW¼ NE¼, NE¼ NW¼
(WSU #3 - Peterson CX GH 30-28D)
Section 29: SW¼ NW¼, NW¼ SW¼
Section 30: SE¼ NE¼, NE¼ SE¼
(WSU #4 - Peterson CX GH 30-40D)
8.
On July 16, 2013, Great Western, 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.
9.
Land testimony and exhibits submitted in support of the Application by K.
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 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 July 29, 2013 hearing date.
10.
Land testimony showed the Applicant complied with the requirements of Rule 530,
and is entitled to the cost recovery provisions pursuant to §34-60-116(7),
C.R.S., for the Peterson CX GH 30-26D Well, the Peterson CX GH 30-27D Well, the
Peterson CX GH 30-28D Well and the Peterson CX GH 30-40D Well, but did not
provide testimony for any subsequent wells.
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.
Great Western 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 Hearing Officer review of the Application under Rule
511., the Commission should enter an order to pool all interests in four
approximate 160-acre designated wellbore spacing units established for Sections
19, 20, 29 and 33, Township 5 North, Range 63 West, 6th P.M., to
accommodate the Peterson CX GH 30-26D Well, the Peterson CX GH 30-27D Well, the
Peterson CX GH 30-28D Well and the Peterson CX GH 30-40D Well, for the
development and operation of the Codell-Niobrara Formation.
ORDER
IT IS HEREBY ORDERED:
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 160-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 any
of the costs specified in C.R.S. §34-60-116(7)(b)(II) are first incurred for the
drilling of the Peterson CX GH 30-26D Well, the Peterson CX GH 30-27D Well, the
Peterson CX GH 30-28D Well and the Peterson CX GH 30-40D Well:
Township 5 North, Range 63 West, 6th P.M.
Section 19: SE¼ SE¼
Section 20: SW¼ SW¼
Section 29: NW¼ NW¼
Section 30: NE¼ NE¼
(WSU #1 - Peterson CX GH 30-26D)
Section 19: S½ SE¼
Section 30: N½ NE¼
(WSU #2 - Peterson CX GH 30-27D)
Section 19: SW¼ SE¼, SE¼ SW¼
Section 30: NW¼ NE¼, NE¼ NW¼
(WSU #3 - Peterson CX GH 30-28D)
Section 29: SW¼ NW¼, NW¼ SW¼
Section 30: SE¼ NE¼, NE¼ SE¼
(WSU #4 - Peterson CX GH 30-40D)
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. Any party seeking the cost recovery
provisions of §34-60-116 (7), C.R.S., shall first comply with subsection (d) for
any subsequent well(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.
8.
The wellbore spacing unit described above, shall be considered a drilling
and spacing unit established by the Commission for purposes of Rule 530.a.
1.
The provisions contained in the above order shall become effective
immediately.
2.
The Commission expressly reserves its right, after notice and hearing, to
alter, amend or repeal any and/or all of the above orders.
3.
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.
4.
An application for reconsideration by the Commission of this Order is not
required prior to the filing for judicial review.
ENTERED this 27 day
of August, 2013, as of July 29, 2013.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary