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 TO POOL
ALL INTERESTS IN FOUR APPROXIMATE 160-ACRE TO 320-ACRE DESIGNATED WELLBORE
SPACING UNITS ESTABLISHED FOR SECTION 24, TOWNSHIP 7 NORTH, RANGE 66 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-159
ORDER NO. 407-847
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REPORT OF THE COMMISSION
The Commission heard this matter on July 29, 2013, at the 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 to 320-acre designated wellbore spacing units established
for Section 24, Township 7 North, Range 66 West, 6th P.M., to
accommodate the Dalton 24Q-441 Well, Dalton 24L-441 Well, Dalton 24Q-241 Well,
and Dalton 24L-201 Well, for the development and operation of the
Codell-Niobrara Formation.
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 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 24, Township 7 North, Range 66 West, 6th P.M. is subject to
Rule 318A for the Codell-Niobrara Formation.
5.
On May 30, 2013, PDC, 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 four approximate 160-acre to 320-acre designated
wellbore spacing units 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 Dalton 24Q-441 Well (API No. 05-123-36098), Dalton 24L-441
Well (API No. 05-123-35824), Dalton 24Q-241 Well (API No. 05-123-36100), and
Dalton 24L-201 Well (API No. 05-123-35826) (collectively “Wells”), and to
subject any nonconsenting interests to the cost recovery provisions of C.R.S.
§34-60-116(7):
Township 7 North, Range 66 West, 6th P.M.
Section 24:
E½ W½
(WSU#1 – 160-acres - Dalton 24Q-441)
Section 24:
W½ W½
(WSU#2 – 160-acres - Dalton 24L-441)
Section 24: E½ W½, W½ E½
(WSU#3 – 320-acres - Dalton 24Q-241)
Section 24: W½
(WSU#4 – 320-acres - Dalton 24L-201)
6.
On July 9, 2013, 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.
7.
Land testimony and exhibits submitted in support of the Application by
John Krattenmaker, Senior Landman for PDC, 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 July 29, 2013 hearing date.
8.
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 Dalton 24Q-441 Well, Dalton 24L-441 Well, Dalton
24Q-241 Well, and Dalton 24L-201 Well.
9.
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.
10. PDC
agreed to be bound by oral order of the Commission.
11.
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 to 320-acre designated wellbore spacing units established
for Section 24, Township 7 North, Range 66 West, 6th P.M., to
accommodate the Dalton 24Q-441 Well, Dalton 24L-441 Well, Dalton 24Q-241 Well,
and Dalton 24L-201 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 to 320-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 Wells:
Township 7 North, Range 66 West, 6th P.M.
Section 24:
E½ W½
(WSU#1 – 160-acres - Dalton 24Q-441)
Section 24:
W½ W½
(WSU#2 – 160-acres - Dalton 24L-441)
Section 24: E½ W½, W½ E½
(WSU#3 – 320-acres - Dalton 24Q-241)
Section 24: W½
(WSU#4 – 320-acres - Dalton 24L-201)
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 Wells (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 Wells 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