BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
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IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE NIOBRARA, FORT HAYS, CODELL, AND CARLILE FORMATIONS, HEREFORD FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 421
DOCKET NO. 171000708
TYPE: SPACING
ORDER NO. 421-100 |
REPORT OF THE COMMISSION
The Commission heard this matter on December 11, 2017, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to: 1) vacate a 640-acre drilling and spacing unit established by Order No. 535-28 for Section 8, Township 10 North, Range 63 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; and 2) establish an approximate 1,280-acre drilling and spacing unit for Sections 8 and 17, Township 10 North, Range 63 West, 6th P.M., and approve up to 21 new horizontal wells for the production of oil, gas, and associated hydrocarbons from the Niobrara, Fort Hays, Codell, and Carlile Formations.
FINDINGS
The Commission finds as follows:
1. Fifth Creek Energy Operating Company, LLC (Operator No. 10629) (“Fifth Creek” or “Applicant”), 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 318.a. of the Rules and Regulations of the Oil and Gas Conservation Commission requires that, on unspaced lands, wells drilled in excess of 2,500 feet in depth be located not less than 600 feet from any lease line, and located not less than 1,200 feet from any other producible or drilling oil or gas well when drilling to the same common source of supply. Sections 8 and 17, Township 10 North, Range 63 West, 6th P.M., are subject to Rule 318.a. for the Fort Hayes, Codell, and Carlile Formations.
5. On June 27, 2011, the Commission entered Order No. 535-28 which, among other things, established 52 approximate 640-acre drilling and spacing units for certain lands located in Townships 10 and 11 North, Ranges 59, 60, 62 through 64, 66, and 67 West, 6th P.M., and approved one horizontal well within each unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation, providing that the surface location for any permitted horizontal well shall be located anywhere in the designated drilling and spacing unit, and the treated interval of the wellbore shall be no closer than 600 feet from the boundaries of the drilling and spacing unit without exception being granted by the Director. Section 8 of the Application Lands is subject to Order No. 535-28 for the Niobrara Formation.
6. On August 31, 2017, amended September 20, 2017, Fifth Creek filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order: 1) vacating a 640-acre drilling and spacing unit established by Order No. 535-28 for Section 8, Township 10 North, Range 63 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; 2) establishing an approximate 1,280-acre drilling and spacing unit for the below described lands (“Application Lands”) for the production of oil, gas, and associated hydrocarbons from the Niobrara, Fort Hays, Codell, and Carlile Formations, 3) approving up to six new horizontal wells in the unit for the production of oil, gas and associated hydrocarbons from the Fort Hays, Codell, and Carlile Formations, and up to 15 new horizontal wells in the unit for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, for a total of up to 21 new horizontal wells in the unit; 4) requiring that the productive interval of each proposed horizontal well in the approximate 1,280-acre drilling and spacing unit shall be no closer than 300 feet from the boundaries of the unit and all horizontal wells shall be no closer than 150 feet from the productive interval of another well producing from the same source of supply within the unit, unless an exception is granted by the Director; and 5) authorizing up to five well pads in the unit, unless an exception is granted by the Director:
Township 10 North, Range 63 West, 6th P.M.
Section 8: All
Section 17: All
8. On October 6, 2017, amended November 21, 2017, Fifth Creek, 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 Teale Stone, Senior Landman for Fifth Creek, showed that both the mineral and surface interests in the Application Lands are owned in fee and federal, and that Fifth Creek owns a partial undivided leasehold ownership interest in the Application Lands. Land testimony further showed that Applicant was changing its request for five well pads to request four well pads.
10. The drilling and spacing unit contains federal minerals. As such, Fifth Creek agreed that it, or its successor operator, will submit a Communitization Agreement (“CA”) to the Bureau of Land Management (“BLM”) at least 90 days before the anticipated date of first production (as defined in the Commission Rules) from the initial well drilled within the drilling and spacing unit. Fifth Creek also agreed with the BLM that approval of the 300-foot setback from the unit boundaries would be conditioned on the adjacent lands having been approved for reciprocal 300-foot setbacks at the time the first well is drilled in the Application Lands.
11. Geoscience testimony and exhibits submitted in support of the Application by Benjamin Burke, Geoscience Manager for Fifth Creek, showed the Niobrara Formation is present throughout the Application Lands and ranges from approximately 230 to 260 feet thick, the Codell Formation is present throughout the Application Lands and ranges from approximately 15 to 17 feet thick, the Carlile Formation is present throughout the Application Lands and ranges from approximately 35 to 40 feet thick, and the Fort Hays Formation is present throughout the Application Lands and ranges from approximately 18 to 20 feet thick.
12. Engineering testimony and exhibits submitted in support of the Application by William Irwin, Engineering Advisor for Fifth Creek, showed that Fifth Creek plans to drill 15 horizontal wells in the Niobrara Formation and six wells in the Codell Formation. The engineering testimony also demonstrated that two-section lateral analog wells have an average lateral length of 9,261 feet and average estimated ultimate recovery of 431,333 barrels for the Niobrara Formation, for a drainage per well of 85 acres, and an approximate 1,280-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by fifteen horizontal wells producing oil, gas and associated hydrocarbons from the Niobrara Formation. The engineering testimony also showed that two-section lateral analog wells have been scaled to an average lateral length of 9,000 feet and average estimated ultimate recovery of 457,203 barrels for the Fort Hays, Codell, and Carlile Formations, for a drainage per well of 178 acres. Engineering testimony also showed that the primary drilling targets are the Niobrara and Codell Formations, but that horizontal wells drilled into the Codell Formation may deviate into the Fort Hays and Carlile Formations; however, this type of occurrence will not impact the drainage area, drainage area calculations, or the economics of wells targeting the Codell Formation. For that reason, the Application is seeking spacing for the Fort Hays and Carlile Formations. Therefore, an approximate 1,280-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by six horizontal wells producing oil, gas and associated hydrocarbons from the Fort Hayes, Codell, and Carlile Formations.
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 hydrocarbons, and will not violate correlative rights.
14. Fifth Creek 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 review of the Application under Rule 511, the Commission should enter an order to: 1) vacate a 640-acre drilling and spacing unit established by Order No. 535-28 for Section 8, Township 10 North, Range 63 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; and 2) establish an approximate 1,280-acre drilling and spacing unit for Sections 8 and 17, Township 10 North, Range 63 West, 6th P.M., and approve up to 21 new horizontal wells for the production of oil, gas, and associated hydrocarbons from the Niobrara, Fort Hays, Codell, and Carlile Formations.
ORDER
IT IS HEREBY ORDERED:
1. A 640-acre drilling and spacing unit established by Order No. 535-28 for Section 8, Township 10 North, Range 63 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation, is hereby vacated.
2. An approximate 1,280-acre drilling and spacing unit for the below-described lands is hereby established for the production of oil, gas and associated hydrocarbons from the Niobrara, Fort Hays, Codell, and Carlile Formations, and a total of up to 15 new horizontal wells within the unit are approved for the production of oil, gas and associated hydrocarbons from the Niobrara Formation and up to six horizontal wells within the unit are approved for the production of oil, gas and associated hydrocarbons from the Fort Hays, Codell, and Carlile Formations:
Township 10 North, Range 63 West, 6th P.M.
Section 8: All
Section 17: All
3. The productive interval of any horizontal wellbore will be located no closer than 300 feet from the unit boundaries, but only as to any unit boundary where the adjacent lands have been approved for reciprocal 300-foot setbacks at the time the first well is drilled in the Application Lands, and no closer than 150 feet from the productive interval of any other wellbore producing from the same source of supply within the unit, without exception being granted by the Director.
4. Any horizontal wells to be drilled shall be drilled from no more than four multi-well pads on the surface of the drilling unit, or on adjacent lands with consent of the landowner, unless an exception is granted by the Director.
5. Fifth Creek, or its successor operator, shall submit a CA to the BLM at least 90 days before the anticipated date of first production (as defined in the Commission Rules) from the initial well drilled within the drilling and spacing unit.
IT IS FURTHER ORDERED:
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 35 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 27th day of December, 2017, as of December 11, 2017.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Julie Spence Prine, Secretary