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. 190100125
TYPE: POOLING
ORDER NO. 421-156 |
REPORT OF THE COMMISSION
The Commission heard this matter on March 11, 2019, at the Ralph L. Carr Colorado Judicial Center, 1300 Broadway, First Floor, Denver, Colorado, upon application for an order to pool all interests within an approximate 1,280-acre drilling and spacing unit established for Section 4, Township 11 North, Range 63 West, 6th P.M., and Section 33, Township 12 North, Range 63 West, 6th P.M., and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of Fox Creek 12-63-33-0560B Well, Fox Creek 12-63-33-0560D Well, Fox Creek 12-63-33-0758D Well, Fox Creek 12-63-33-0857B Well, Fox Creek 12-63-33-0758B Well, Fox Creek 12-63-33-0659B Well, Fox Creek 33-0164B Well, Fox Creek 33-0164D Well, Fox Creek 33-0263B Well, Fox Creek 33-0362B Well, Fox Creek 33-0362D Well, and the Fox Creek 33-0461B Well, for the development and operation of the Niobrara, Fort Hays, Codell, and Carlile Formations.
FINDINGS
The Commission finds as follows:
1. HighPoint Operating Corporation (Operator No. 10071) (“HighPoint” 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 February 22, 2010 (corrected January 19, 2012), the Commission entered Order No. 421-1 which, among other things, established two approximate 640-acre drilling and spacing units for Section 4, Township 11 North, Range 63 West, 6th P.M., and Section 33, Township 12 North, Range 63 West, 6th P.M., and approved one horizontal well within each unit, for the development and operation of the Niobrara Formation, with the productive interval of the wellbore to be located no closer than 600 feet from the unit boundaries, without exception being granted by the Director. Order No. 421-1 was vacated as to Section 4, Township 11 North, Range 63 West, 6th P.M., and Section 33, Township 12 North, Range 63 West, 6th P.M., by Order No. 421-118.
5. On February 27, 2015 (amended April 27, 2015), the Commission entered Order No. 421-57 which, among other things, established an approximate 1,280-acre drilling and spacing unit for Section 4, Township 11 North, Range 63 West, 6th P.M., and Section 33, Township 12 North, Range 63 West, 6th P.M., and approved one horizontal well within the unit, for the production of oil, gas and associated hydrocarbons from the Codell Formation. Order No. 421-57 was vacated as to Section 4, Township 11 North, Range 63 West, 6th P.M., and Section 33, Township 12 North, Range 63 West, 6th P.M., by Order No. 421-118.
6. On July 20, 2015, the Commission entered Order No. 421-64 which, among other things, modified Order No. 421-57 to approve a total of up to six horizontal wells within the approximate 1,280-acre drilling and spacing unit established for Section 4, Township 11 North, Range 63 West, 6th P.M., and Section 33, Township 12 North, Range 63 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Codell Formation, with the productive interval of the wellbore to be located no closer than 460 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, without exception being granted by the Director. Order No. 421-64 was vacated as to Section 4, Township 11 North, Range 63 West, 6th P.M., and Section 33, Township 12 North, Range 63 West, 6th P.M., in Order No. 421-118.
7. On December 12, 2016, the Commission entered Order No. 421-78 which, among other things, modified Order Nos. 421-57 and 421-64 to allow the productive interval of any permitted well to be located no closer than 300 feet from the unit boundaries of the approximate 1,280-acre drilling and spacing unit established for Section 4, Township 11 North, Range 63 West, 6th P.M., and Section 33, Township 12 North, Range 63 West, 6th P.M., for the production of the oil, gas, and associated hydrocarbons from the Codell Formation. Order No. 421-78 was vacated as to Section 4, Township 11 North, Range 63 West, 6th P.M., and Section 33, Township 12 North, Range 63 West, 6th P.M., by Order No. 421-118.
8. On January 30, 2017, the Commission entered Order No. 421-82 which, among other things, established an approximate 1,280-acre drilling and spacing unit for Section 4, Township 11 North, Range 63 West, 6th P.M., and Section 33, Township 12 North, Range 63 West, 6th P.M., providing that the existing 640-acre units for the production of the existing wells shall be maintained only until the date of first completion of the new horizontal well into the unit, and approved up to eight new horizontal wells in the approximate 1,280-acre drilling and spacing unit, providing that the productive interval of each wellbore shall be located no closer than 300 feet from the boundaries of the unit and 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, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation. Order No. 421-82 was vacated as to Section 4, Township 11 North, Range 63 West, 6th P.M., and Section 33, Township 12 North, Range 63 West, 6th P.M., by Order No. 421-118.
9. On September 11, 2017, the Commission entered Order No. 421-91 which, among other things, approved an additional seven horizontal wells, for a total of 15 horizontal wells, in an approximate 1,280-acre drilling and spacing units established for Section 4, Township 11 North, Range 63 West, 6th P.M., and Section 33, Township 12 North, Range 63 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from Niobrara Formation. Order No. 421-91 was vacated as to Section 4, Township 11 North, Range 63 West, 6th P.M., and Section 33, Township 12 North, Range 63 West, 6th P.M., by Order No. 421-118.
10. On July 30, 2018, the Commission entered Order No. 421-118 which, among other things, vacated Order Nos. 421-1, 421-57, 421-64, 421-78, 421-82, and 421-91 as they relate to Section 4, Township 11 North, Range 63 West, 6th P.M., and Section 33, Township 12 North, Range 63 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations; and established an approximate 1,280-acre drilling and spacing unit for Section 4, Township 11 North, Range 63 West, 6th P.M., and Section 33, Township 12 North, Range 63 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara, Fort Hays, Codell, and Carlile Formations.
11. On November 29, 2018, amended December 20, 2018, HighPoint, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to pool all interests in an approximate 1,280-acre drilling and spacing unit established for the below-described lands (“Application Lands”), for the development and operation of the Niobrara, Fort Hays, Codell, and Carlile Formations, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Fox Creek 12-63-33-0560B Well (API No. 05-123-42602), Fox Creek 12-63-33-0560D Well (API No. 05-123-42603), Fox Creek 12-63-33-0758D Well (API No. 05-123-48510), Fox Creek 12-63-33-0857B Well (API No. 05-123-48511), Fox Creek 12-63-33-0758B Well (API No. 05-123-48512), Fox Creek 12-63-33-0659B Well (API No. 05-123-48513), Fox Creek 33-0164B Well (API 05-123-48704), Fox Creek 33-0164D Well (API No. 05-123-48705), Fox Creek 33-0263B Well (API No. 05-123-48701), Fox Creek 33-0362B Well (API No. 05-123-48702), Fox Creek 33-0362D Well (API No. 05-123-48706), and the Fox Creek 33-0461B Well (API No. 05-123-48703) (“Wells”):
Township 11 North, Range 63 West, 6th P.M.
Section 4: All
Township 12 North, Range 63 West, 6th P.M.
Section 33: All
12. On December 27, 2018, Applicant, 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.
13. Land testimony and exhibits submitted in support of the Application by Leslie Mann, Landman for HighPoint, showed that all nonconsenting interest owners were notified of the Application and received Authority for Expenditures ("AFEs") and offers to participate in the Wells. Further testimony concluded that the AFEs sent by the Applicant to the interest owners were fair and reasonable estimates of the costs of the proposed drilling operations and were received at least 60 days prior to the March 11, 2019 hearing date.
14. 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 Fox Creek 12-63-33-0560B Well, Fox Creek 12-63-33-0560D Well, Fox Creek 12-63-33-0758D Well, Fox Creek 12-63-33-0857B Well, Fox Creek 12-63-33-0758B Well, Fox Creek 12-63-33-0659B Well, Fox Creek 33-0164B Well, Fox Creek 33-0164D Well, Fox Creek 33-0263B Well, Fox Creek 33-0362B Well, Fox Creek 33-0362D Well, and the Fox Creek 33-0461B Well, but did not provide testimony for any subsequent wells.
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, 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 an approximate 1,280-acre drilling and spacing unit established for Section 4, Township 11 North, Range 63 West, 6th P.M., and Section 33, Township 12 North, Range 63 West, 6th P.M., and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Fox Creek 12-63-33-0560B Well, Fox Creek 12-63-33-0560D Well, Fox Creek 12-63-33-0758D Well, Fox Creek 12-63-33-0857B Well, Fox Creek 12-63-33-0758B Well, Fox Creek 12-63-33-0659B Well, Fox Creek 33-0164B Well, Fox Creek 33-0164D Well, Fox Creek 33-0263B Well, Fox Creek 33-0362B Well, Fox Creek 33-0362D Well, and the Fox Creek 33-0461B Well, for the development and operation of the Niobrara, Fort Hays, Codell, and Carlile Formations.
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 an approximate 1,280-acre drilling and spacing unit established for the below-described lands are hereby pooled, for the development and operation of the Niobrara, Fort Hays, Codell, and Carlile Formations, effective as of the earlier of the date of the Application, or the date that any of the costs specified in §34-60-116(7)(b)(II), C.R.S., are first incurred for the drilling of the Fox Creek 12-63-33-0560B Well (API No. 05-123-42602), Fox Creek 12-63-33-0560D Well (API No. 05-123-42603), Fox Creek 12-63-33-0758D Well (API No. 05-123-48510), Fox Creek 12-63-33-0857B Well (API No. 05-123-48511), Fox Creek 12-63-33-0758B Well (API No. 05-123-48512), Fox Creek 12-63-33-0659B Well (API No. 05-123-48513), Fox Creek 33-0164B Well (API 05-123-48704), Fox Creek 33-0164D Well (API No. 05-123-48705), Fox Creek 33-0263B Well (API No. 05-123-48701), Fox Creek 33-0362B Well (API No. 05-123-48702), Fox Creek 33-0362D Well (API No. 05-123-48706), and the Fox Creek 33-0461B Well (API No. 05-123-48703) (“Wells”):
Township 11 North, Range 63 West, 6th P.M.
Section 4: All
Township 12 North, Range 63 West, 6th P.M.
Section 33: All
2. The production obtained from the drilling and 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 drilling and spacing unit; each owner of an interest in the drilling and spacing unit shall be entitled to receive its share of the production of the Wells located on the drilling and spacing unit applicable to its interest in the drilling and spacing unit.
3. Any working interest owner who does not elect to participate in the Well(s) or fails to make a timely election is hereby deemed to be nonconsenting and is subject to the penalties as provided for in §34-60-116(7), C.R.S. The nonconsenting working interest owner must reimburse the consenting owners for the owner’s proportionate share of the costs and risks of drilling and operating the Well(s) from the owner’s proportionate share of production, subject to non-cost bearing interests, if and to the extent that the royalty is consistent with the lease terms prevailing in the area and is not designed to avoid the recovery of costs provided for in §34-60-116(7)(b), C.R.S., until costs and penalties are recovered as set forth in §34-60-116(7), C.R.S.
4. Any unleased owner who does not elect to participate in the Well(s) or fails to make a timely election is hereby deemed to be nonconsenting and is subject to the penalties as provided for in §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 drilling and 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. 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 Wells drilled on the above-described drilling and 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. In accordance with §34-60-116(7)(a)(III), C.R.S., a nonconsenting owner is immune from liability for costs arising from spills, releases, damage, or injury resulting from oil and gas operations on the drilling and spacing unit.
8. 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.
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 26th day of March, 2019, as of March 11, 2019
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Mimi C. Larsen, Secretary