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. 180300152
TYPE: SPACING
ORDER NO. 421-109 & 535-992 |
REPORT OF THE COMMISSION
The Commission heard this matter on March 19, 2018, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to: 1) maintain an approximate 640-acre drilling and spacing unit established by Order No. 421-3 for Section 23, Township 11 North, Range 64 West, 6th P.M., for purposes of payment of proceeds from the Lion Creek #06-23H (API No. 05-123-32698), for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; 2) vacate an approximate 640-acre drilling and spacing unit established by Order Nos. 407-481 and 535-77 for Section 26, Township 11 North, Range 64 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; and 3) establish an approximate 1,280-acre drilling and spacing unit for Sections 23 and 26, Township 11 North, Range 64 West, 6th P.M., and approve up to 21 horizontal wells within the unit, 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”), 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 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 23 and 26, Township 11 North, Range 64 West, 6th P.M., are subject to Rule 318.a. for the Niobrara, Fort Hays, Codell, and Carlile Formations.
5. On October 21, 2010, the Commission entered Order No. 421-3 which, among other things, established 83 approximate 640-acre drilling and spacing units for certain lands, including Section 23, Township 11 North, Range 64 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation, with no more than one horizontal well to be drilled in each unit from a surface location anywhere in the unit with the horizontal leg and bottom-hole location to be not closer than 600 feet from the boundaries of each unit.
6. On September 19, 2011, the Commission entered Order Nos. 407-481 and 535-77 which, among other things, established two approximate 640-acre drilling and spacing units for Section 20, Township 4 North, Range 62 West, 6th P.M. and Section 26, Township 11 North, Range 64 West, 6th P.M., and approved one horizontal well within each unit, for the production of oil, gas, and associated hydrocarbons of the Niobrara Formation.
7. On January 17, 2018, Fifth Creek, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to: 1) maintain the approximate 640-acre drilling and spacing unit established by Order No. 421-3 for Section 23, Township 11 North, Range 64 West, 6th P.M., for purposes of payment of proceeds from the Lion Creek #06-23H (API No. 05-123-32698), for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; 2) vacate an approximate 640-acre drilling and spacing unit established by Order Nos. 407-481 and 535-77 for Section 26, Township 11 North, Range 64 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; and 3) establish an approximate 1,280-acre drilling and spacing unit for the below-described lands (“Application Lands”) and to approve 15 horizontal wells within the unit for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation and six horizontal wells within the unit for the production of oil, gas, and associated hydrocarbons from the Fort Hays, Codell, and Carlile Formations, with the productive interval of any horizontal well to be no closer than 300 feet from the unit boundaries, and not less than 150 feet from the productive interval of another well within the unit, without exception being granted by the Director:
Township 11 North, Range 64 West, 6th P.M.
Section 23: All
Section 26: All
Applicant stated that any horizontal wells to be drilled will be drilled from no more than five 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.
8. On February 5, 2018, 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 the mineral interests in the Application Lands are owned in fee and federal, the surface interests in the Application Lands are owned in fee, and that Fifth Creek owns a partial undivided leasehold ownership interest in the Application Lands.
10. Geoscience testimony and exhibits submitted in support of the Application by Benjamin C. Burke, Geoscience Manager for Fifth Creek, showed the Niobrara Formation is present throughout the Application Lands and ranges from approximately 240 to 280 feet thick, the Fort Hays Formation is present throughout the Application Lands and ranges from approximately 15 to 19 feet thick, the Codell Formation is present throughout the Application Lands and ranges from approximately 19 to 23 feet thick, and the Carlile Formation is present throughout the Application Lands and ranges from approximately 29 to 50 feet thick.
11. Engineering testimony and exhibits submitted in support of the Application by William Irwin, Engineering Advisor for Fifth Creek, showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 85 acres, and an approximate 1,280-acre drilling and spacing unit is therefore not less than the maximum area that can be efficiently, economically, and effectively drained by 15 horizontal well producing oil, gas, and associated hydrocarbons from the Niobrara Formation. The engineering testimony also showed that the drainage area for analog horizontal Codell Formation wells is estimated at 178 acres, and an appropriate 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 Codell Formation. Finally, the engineering testimony affirmed that the Fort Hays and Carlile Formations are not intentional target formations for the planned wells, but should be included in the drilling and spacing unit in the event a wellbore wanders outside of the target zone. Engineering testimony further showed that the drilling of up to six Codell Formation wells in a 1,280-acre drilling and spacing unit with 300-foot setbacks results in an improved recovery factor of 33% as compared to six Codell wells drilled in a 640-acre drilling and spacing unit with 460-foot setbacks, and therefore a 300-foot setback from the unit boundaries is appropriate for horizontal Niobrara, Fort Hays, Codell, and Carlile Wells.
12. 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.
13. Fifth Creek agreed to be bound by oral order of the Commission.
14. 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) maintain an approximate 640-acre drilling and spacing unit established by Order No. 421-3 for Section 23, Township 11 North, Range 64 West, 6th P.M., for purposes of payment of proceeds from the Lion Creek #06-23H (API No. 05-123-32698), for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; 2) vacate an approximate 640-acre drilling and spacing unit established by Order Nos. 407-481 and 535-77 for Section 26, Township 11 North, Range 64 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; and 3) establish an approximate 1,280-acre drilling and spacing unit for Sections 23 and 26, Township 11 North, Range 64 West, 6th P.M., and approve up to 21 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara, Fort Hays, Codell, and Carlile Formations.
ORDER
IT IS HEREBY ORDERED:
1. An approximate 640-acre drilling and spacing unit established by Order No. 421-3 for Section 23, Township 11 North, Range 64 West, 6th P.M., is hereby maintained for purposes of payment of proceeds from the Lion Creek #06-23H (API No. 05-123-32698), for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.
2. An approximate 640-acre drilling and spacing unit established by Order Nos. 407-481 and 535-77 for Section 26, Township 11 North, Range 64 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation, is hereby vacated.
3. 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 Codell, Fort Hays, Carlile and Niobrara Formations, and a total of up to six new horizontal wells within the unit, are hereby approved, for the production of oil, gas, and associated hydrocarbons from the Codell, Fort Hays, and Carlile Formations, and a total of up to 15 new horizontal wells within the unit, are hereby approved, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation:
Township 11 North, Range 64 West, 6th P.M.
Section 23: All
Section 26: All
4. The productive interval of any wellbore will be located no closer than 300 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore within the unit, unless an exception is granted by the Director.
5. The proposed wells shall be located on no more than five 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.
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 13th day of April, 2018, as of March 19, 2018.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By_______________________________________
Julie Spence Prine, Secretary