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. 180700592
TYPE: SPACING
ORDER NO. 421-136 |
REPORT OF THE COMMISSION
The Commission heard this matter on September 17, 2018, at the Garfield County Sheriff's Annex – Rifle, 106 County Road 333-A, Rifle, Colorado, upon application for an order to: 1) vacate Order No. 421-33, which established an approximate 1,280-acre drilling and spacing unit for Sections 4 and 9, Township 10 North, Range 62 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 9 and 16, Township 10 North, Range 62 West, 6th P.M. and approve up to 16 new 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. HighPoint Operating Corporation (Operator No. 10071) (“HighPoint” 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. Section 9, Township 10 North, Range 62 West, 6th P.M. is subject to this Rule for the Fort Hays, Codell, and Carlile Formations. Section 16, Township 10 North, Range 62 West, 6th P.M. is subject to this Rule 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, and approved one horizontal well within each unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation. Section 9, Township 10 North, Range 62 West, 6th P.M. is subject to this Order for the Niobrara Formation.
6. On January 7, 2013, the Commission entered Order No. 421-33 which, among other things, vacated two approximate 640-acre drilling and spacing units established by Order No. 421-3 for Sections 4 and 9, Township 10 North, Range 62 West, 6th P.M., and establish an approximate 1,280-acre drilling and spacing unit for Sections 4 and 9, Township 10 North, Range 62 West, 6th P.M., and approve up to ten wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.
7. On May 31, 2018, HighPoint, by its attorneys, filed with the Commission pursuant to §34-60-116, C.R.S., a verified application (“Application”) for an order to: 1) vacate Order No. 421-33, which established an approximate 1,280-acre drilling and spacing unit for Sections 4 and 9, Township 10 North, Range 62 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 for the below-described lands (“Application Lands”), and approve up to 16 new horizontal wells within the unit for the production of oil, gas, and associated hydrocarbons from the Niobrara, Fort Hays, Codell, and Carlile Formations, with the productive interval of the wellbores in the Niobrara and Fort Hays Formations to be located no closer than 150 feet from unit boundaries, the productive interval of the wellbores in the Codell and Carlile Formations to be located no closer than 300 feet from the unit boundaries, and the productive interval of the wellbores in the Niobrara, Fort Hays, Codell, and Carlile Formations to be located no closer than 150 feet from the productive interval of any other wellbore located in the unit, unless the Director grants an exception:
Township 10 North, Range 62 West, 6th P.M.
Section 9: All
Section 16: All
Applicant stated that any horizontal wells to be drilled under this Application will be drilled from no more than two multi-well pads on the surface of the drilling unit, or on adjacent lands with consent of the landowner, unless the Director grants an exception.
8. Applicant also requested that the Smuggler #16-10-62 Well (API No. 05-123-31853) be excluded from the proposed approximate 1,280-acre drilling and spacing unit for the purposes of payment of proceeds.
9. On July 3, 2018, supplemented on July 13, 2018, HighPoint, 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.
10. This drilling and spacing unit contains Colorado State Board of Land Commissioners (State Land Board) leased and/or unleased minerals. As such, HighPoint agreed that a Communitization Agreement with the State Land Board will be required for all wells drilled under the terms of this Order. HighPoint further agreed that a Communitization Agreement must be submitted prior to drilling operations for a well within the drilling and spacing unit.
11. Land testimony and exhibits submitted in support of the Application by Bennett Meyer, Landman for HighPoint, showed that the mineral ownership of the Applications Lands is owned in fee and state and that HighPoint has a partial leasehold interest with the right to drill in the Application Lands.
12. Geology testimony and exhibits submitted in support of the Application by Dan Moore, Senior Geologist for HighPoint, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 310 to 330 feet thick, and is a common source of supply underlying the Application Lands. The geologic testimony showed that the Niobrara Formation consists of a sequence of chalks, marls, and limestones. Geologic testimony further showed that the Fort Hays Formation is present throughout the Application Lands, is approximately 22 to 24 feet thick, and is a common source of supply underlying the Application Lands. The geologic testimony showed that the Fort Hays Formation is limestone. Geologic testimony further showed that the Codell Formation is present throughout the Application Lands, is approximately 17 to 19 feet thick, and is a common source of supply underlying the Application Lands. The geologic testimony showed that the Codell Formation is a sequence of siltstones and sandstones. Geologic testimony further showed that the Carlile Formation is present throughout the Application Lands, is approximately 29 to 31 feet thick, and is a common source of supply underlying the Application Lands. The geologic testimony showed that the Carlile Formation consists of shale.
13. Engineering testimony and exhibits submitted in support of the Application by Sean Stewart, Senior Reservoir Engineer at HighPoint, showed that HighPoint plans to drill four to six horizontal Codell Formation wells and 10 to 12 horizontal Niobrara Formation wells. In addition, the engineering testimony showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 54 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 10 to 12 horizontal wells 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 78 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 four to six horizontal wells producing oil, gas, and associated hydrocarbons from the Codell Formation. The engineering testimony also showed that the primary drilling targets are the Codell and Niobrara Formations, but that horizontal wells targeting the Codell Formation might deviate into the Fort Hays and Carlile Formations. However, this type of occurrence will not impact the drainage area calculations.
14. In addition, the engineering testimony showed that the average drainage distance from wellbores in the Niobrara and Fort Hays Formations is estimated to be 115 feet. The engineering testimony also showed that the average drainage distance from wellbores in the Codell and Carlile Formations is estimated to be 170 feet. Thus, the requested setbacks of 150 feet from the unit boundaries for wellbores in the Niobrara and Fort Hays Formations and 300 feet from the unit boundaries for wellbores in the Codell and Carlile formations are appropriate.
15. 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.
16. HighPoint agreed to be bound by oral order of the Commission.
17. Based on the facts stated in the verified Application, no protests having been filed, and based on the Hearing Officer review of the Application under Rule 511., the Commission should enter an order to: 1) vacate Order No. 421-33, which established an approximate 1,280-acre drilling and spacing unit for Sections 4 and 9, Township 10 North, Range 62 West, 6th P.M. for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; 2) establish an approximate 1,280-acre drilling and spacing unit for Sections 9 and 16, Township 10 North, Range 62 West, 6th P.M. and approve up to 16 new horizontal wells within the unit for the production of oil, gas, and associated hydrocarbons from the Niobrara, Fort Hays, Codell, and Carlile Formations; and 3) exclude the Smuggler #16-10-62 Well (API No. 05-123-31853) from the approximate 1,280-acre drilling and spacing unit established by this proposed Order for the purposes of payment of proceeds.
ORDER
IT IS HEREBY ORDERED:
1. Order No. 421-33, which established an approximate 1,280-acre drilling and spacing unit for Sections 4 and 9, Township 10 North, Range 62 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, and up to 16 new horizontal wells within the unit are hereby approved for the production of oil, gas, and associated hydrocarbons from the Niobrara, Fort Hays, Codell, and Carlile Formations:
Township 10 North, Range 62 West, 6th P.M.
Section 9: All
Section 16: All
3. The productive interval of the wellbores in the Niobrara and Fort Hays Formations will be located no closer than 150 feet from unit boundaries, the productive interval of the wellbores in the Codell and Carlile Formations will be located no closer than 300 feet from the unit boundaries, and the productive interval of the wellbores in the Niobrara, Fort Hays, Codell, and Carlile Formations will be located no closer than 150 feet from the productive interval of any other wellbore located in the unit, unless the Director grants an exception.
4. All wells permitted under this Order will be drilled from no more than two multi-well pads within the Application Lands, or on adjacent lands with consent of the landowner, unless the Director grants an exception.
5. The Smuggler #16-10-62 Well (API No. 05-123-31853) shall be excluded from the approximate 1,280-acre drilling and spacing unit established by this Order for the purposes of payment of proceeds.
6. A Communitization Agreement with the State Land Board will be required for all wells drilled under the terms of this Order. A Communitization Agreement must be submitted prior to drilling operations for a well 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 2nd day of October, 2018, as of September 17, 2018.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By__________________________________
Julie Spence Prine, Secretary