BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO

 

IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE BORDER AND MAY FIELDS, WELD COUNTY, COLORADO

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CAUSE NOS. 416 and 516

 

ORDER NOS. 416-1 and 516-2

 

           

REPORT OF THE COMMISSION

 

This cause came on for hearing before the Commission at 9:00 a.m. on August 18, 2009, at the La Quinta Inn & Suites, 2833 Toupal Drive, Trinidad, Colorado, for an order to establish an enhanced recovery unit (the Moyer Unit) and approve enhanced recovery operations for certain lands in Township 12 North, Range 56 West, 6th P.M., for the development of the reservoir consisting of the D Sand and J Sand Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.  Beren Corporation (Beren), 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.  Rule 401. of the Rules and Regulations of the Oil and Gas Conservation Commission, states that prior to performing enhanced recovery operations or carrying on any method of unit operations, written authorization from the Commission must first be obtained.

 

5.  On June 29, 2009, Beren, by its attorney, filed with the Commission a verified application for an order to establish an enhanced recovery unit and approve enhanced recovery operations, for the development of the reservoir consisting of the D Sand and J Sand Formations, for the below-listed lands (the proposed Moyer Unit or Unit Area):

 

Township 12 North, Range 56 West, 6th P.M.

Section 28:

SW

Section 29:

W, SE, and S NE

Section 30:

E

Section 32:

All

Section 33:

NW

 

Beren has obtained 100% consent of the working interest owners in the Unit Area upon which the enhanced recovery operations will take place, and Beren has reached agreements with more than 80% of the royalty interests in the Unit Area.  Beren asserts that unitization of the D Sand and J Sand within the Unit Area is reasonably necessary to increase the ultimate recovery of oil and associated hydrocarbons.  In addition, Beren asserts that the proposed plan for unit operations for the Moyer Unit is necessary for the effective, efficient and economical development of the Unit Area and will result in the protection of correlative rights and the prevention of waste.

 

6.    On August 4, 2009, an administrative hearing was convened wherein sworn testimony and supporting exhibits were presented by Beren in support of the application.  Further, it was represented by counsel to Beren, that Beren owns 100% of the working interests in all the application lands upon which the enhanced recovery operations will take place, and that Beren has reached agreements with more than 80% of the royalty interests in the Unit Area.

 

7.    Testimony and exhibits admitted during the course of the administrative hearing showed that Beren operates and/or owns leasehold interests in existing oil and gas wells on, or adjacent to, the application lands.  Additional testimony established the ownership of both the surface and minerals in and surrounding the Unit Area, and that Beren has received the consent of 100% of the working interest owners in the Unit Area and has the consent of approximately 87% of the royalty interest owners to form the Moyer Unit and conduct the proposed operations thereon.

 

8.         Testimony and exhibits admitted during the course of the administrative hearing showed that production from the D Sand and J Sand Formations has nearly depleted the primary reserves and, consequently, supports the creation of an enhanced recovery unit.  Additional testimony and exhibits showed that the D Sand and J Sand Formations underlying the application lands are lenticular marine bar sandstones having stratigraphically trapped oil, and that stratigraphic mechanisms separate the Unit Area from adjacent fields.  Further testimony and exhibits showed that the Graneros Shale (a marine shale and an excellent barrier immediately above the D Sand Formation, at a depth range from 6152 feet to 6250 feet), the Skull Creek Shale (a shale which lies underneath the J Sand Formation at a depth range from 6542 feet to 6494 feet), and the Huntsman Shale (a marine shale immediately below the D Sand Formation at a depth range of 6266 feet to 6352 feet) Formations will limit the movement of water to other formations.  Testimony and exhibits demonstrated that drinking water within the Unit Area is confined to an unnamed, unconsolidated alluvial material found in the Lost Creek Ground Water Basin, and that the surface casing on the proposed injection wells was set at depths between 140 feet and 502 feet which is sufficient to protect the fresh water sources.  Further testimony and exhibits indicated that Beren proposes to convert eight wells, indicated to injection wells for purposes of enhanced recovery, and will inject produced water from the D Sand and J Sand Formations back into the formation for purposes of this waterflood, where produced water analysis indicates 15,000 to 20,000 ppm TDS with 6,000 to 9,000 ppm chloride concentrations..  Testimony indicated that the fracture gradient for the D Sand and J Sand Formations is estimated to be 0.83 psi/ft based upon calculations of the original completions, and that Beren proposes to inject approximately 200 BWPD initially with a potential to increase to 500 BWPD with a maximum surface pressure at the injection wells of 2000 psi.

 

9.    Testimony and exhibits admitted during the course of the administrative hearing showed that secondary recovery operations are expected to produce 475,000 barrels of oil over the next 14 years, which represents 25% of primary recovery, and that Beren has determined that the value of the estimated secondary recovery of oil and associated gas exceeds the estimated costs associated with conducting these operations.  Further testimony indicated that unitization of the D Sand and J Sand Formations under the application lands is reasonably necessary to increase the ultimate recovery of oil and associated hydrocarbons, and that unitization is necessary for the effective, efficient and economical development of the application lands and will result in the protection of correlative rights and the prevention of waste.

 

10.  The terms and conditions provided by the Unit Agreement meet the requirements of the statute and are just and reasonable to all interests contained within said unit area.  The plan for unit operations as presented by Beren, as described herein, is necessary to increase the ultimate recovery of oil and gas and the value of the estimated additional recovery of oil and gas exceeds the estimated additional cost incident to conducting such operations.

 

11.  The provisions contained in said Unit Agreement are just and reasonable and include the following:

 

a.    The description of the pool to be so operated;

 

b.    The nature of said operation;

 

c.   The allocation to the separately owned tracts in the Unit Area of all the oil and gas that is produced from said Unit Area and is saved;

 

d.   The provision for the credits and charges to be made in the adjustment among the owners in the Unit Area for their respective investments in wells, tanks, pumps, machinery, materials, and equipment contributed to the unit operations;

 

e.   The provision providing how the costs of unit operations, including capital investments, shall be determined and charged to the separately owned tracts, and how said costs shall be paid, including the provision providing when, how, and by whom the unit production allocated to an owner who does not pay the share of the cost of unit operations charged to such owner, or the interest of such owners, may be sold and the proceeds applied to the payment of such costs;

 

f.    The provision for the supervision and conduct of the unit operations, in respect to which person shall have a vote with a value corresponding to the percentage of the costs of unit operations chargeable against the interest of such person; and

 

g.   The time when the unit operations shall commence, and the manner in which, and the circumstances under which the unit operations shall terminate.

 

12. Testimony and exhibits submitted at the administrative hearing showed that the D Sand and J Sand Formations underlying the Unit Area do not contain water of sufficient quality to need an aquifer exemption under Rule 324B, and, therefore, an aquifer exemption is not required under this application.

 

13.  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 oil, and will not violate correlative rights.

 

14.  Beren Corporation agreed to be bound by oral order of the Commission. 

 

15.  Based on the facts stated in the verified application, having received no protests, and based on the Hearing Officer having conducted an administrative hearing, it is recommended that the Commission should enter an order to establish an enhanced recovery unit for the Moyer Unit, approve enhanced recovery operations, and approve the associated Unit Agreement, for certain lands in Township 12 North, Range 56 West, 6th P.M., for the development of the reservoir consisting of the D Sand and J Sand Formations.

 

ORDER

 

NOW, THEREFORE IT IS ORDERED, that an enhanced recovery unit and enhanced recovery operations are hereby approved for the development of the reservoir consisting of the D Sand and J Sand Formations, for the below-listed lands (the Moyer Unit):

 

Township 12 North, Range 56 West, 6th P.M.

Section 28:

SW

Section 29:

W, SE, and S NE

Section 30:

E

Section 32:

All

Section 33:

NW

 

                        IT IS FURTHER ORDERED, that, 1.  The Unit Agreement, covering lands in the Moyer Unit, which agreements are made a part of the original order of this Commission on file in the office of the Commission, are hereby approved as being in the public interest for conservation.

 

2.    The D Sand and J Sand Formations are a common source of supply and have been defined and determined by drilling to be productive underlying the Moyer Unit.

 

3.    The provisions contained in said Unit Agreement as they pertain to 34-60-118, C.R.S., as amended, of the Oil and Gas Conservation Act are just and reasonable, and are incorporated herein as the Commission's plan of involuntary unit operations for such lands.

 

4.    Any injection well to be located in the Unit Area shall be approved by the Director in accordance with the rules and regulations of the Commission.

 

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith.

 

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 thirty (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 August, 2009, as of August 18, 2009.

           

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By____________________________________         

                                                                                    Robert A. Willis, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado  80203

August 25, 2009