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 FOR THE CODELL FORMATION HEREFORD FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 421

 

DOCKET NO. 150700418

 

ORDER NO. 421-66

 

TYPE: POOLING

REPORT OF THE COMMISSION

 

The Commission heard this matter on July 20, 2015, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to pool all interests in an approximate 1302.08-acre drilling and spacing unit established for Sections 14, 23, and 26, Township 12 North, Range 64 West, 6th P.M., and to subject all nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S. for the drilling of the Cox 5 Well, for the development and operation of the Codell Formation.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Extraction Oil & Gas, LLC (Operator No. 10459) (“Extraction” 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 December 15, 2014, Order No. 421-46 (Amended May 19, 2015) established a 1302.08-acre drilling and spacing unit for production of oil, gas, and associated hydrocarbons from the Codell Formation, allowed up to four horizontal wells within the unit, and required that the productive interval of each wellbore shall be no closer than 600 feet from the productive interval of any other wellbore producing from the Codell Formation and no closer than 300 feet from a unit boundary unless such boundary abuts or corners lands for which the Commission has not at the time of the drilling application granted the right to locate the productive interval of the wellbore no closer than 300 feet from a unit boundary, without exception being granted by the Director.  Sections 14, 23, and 26, Township 12 North, Range 64 West, 6th P.M., are subject to this Order.

5.         On May 21, 2015, Extraction, 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 1302.08-acre drilling and spacing unit established for the below-described lands (“Application Lands”), for the development and operation of the Codell Formation, and to subject any nonconsenting interests to the cost recovery provisions of C.R.S. §34-60-116(7), for the drilling of the Cox 5 Well (API No. Pending) (“Well”):

 

Township 12 North, Range 64 West, 6th P.M.

Section 14:      Lots 1-4 (lying and being within the State

                      of Colorado)

Section 23:      All

Section 26:     All

 

6.         On June 29, 2015, supplemented on July 9, 2015, 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.

 

7.         Land testimony and exhibits submitted in support of the Application by Drew Stout, Land Tech for Extraction, showed that all nonconsenting interest owners were notified of the Application and received Authority for Expenditures ("AFEs") and offers to participate in the Well. 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 35 days prior to the July 20, 2015 hearing date.

                                                 

8.         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 Cox 5 Well, but did not provide testimony for any subsequent Well.

 

9.         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.

 

10.       Extraction agreed to be bound by oral order of the Commission.

 

11.       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 1302.08-acre drilling and spacing unit established for Sections 14, 23, and 26, Township 12 North, Range 64 West, 6th P.M., and to subject all nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S. for the drilling of the Cox 5 Well, for the development and operation of the Codell Formation.

 

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 1302.08-acre drilling and spacing unit established for the below-described lands are hereby pooled, for the development and operation of the Codell Formation, effective as of the earlier of the date of the Application, or the date that any of the costs specified in C.R.S. §34-60-116(7)(b)(II) are first incurred for the drilling of the Cox 5 Well (API No. Pending):

 

 

Township 12 North, Range 64 West, 6th P.M.

Section 14:      Lots 1-4 (lying and being within the State

                      of Colorado)

Section 23:      All

Section 26:     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 Well located on the drilling and spacing unit applicable to its interest in the drilling and spacing unit.

 

3.         The nonconsenting owners must reimburse the consenting working interest owners for their share of the costs and risks of drilling and operating the Well (including penalties as provided by §34-60-116(7)(b), C.R.S.) out of production from the drilling and spacing unit representing the cost-bearing interests of the nonconsenting working interest owners as provided by §34-60-116(7)(a), C.R.S.

 

4.         Any unleased owners are hereby deemed to have elected not to participate and shall therefore be deemed to be nonconsenting as to the Well and be subject to the penalties as provided for by §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. as amended.  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 Well 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.         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 4th day of August, 2015, as of July 20, 2015.

           

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By____________________________________

Julie Murphy, Secretary