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 AND NIOBRARA FORMATIONS, HEREFORD FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 421

 

DOCKET NO. 150900545

 

ORDER NO. 421-73

 

TYPE: SPACING

 

REPORT OF THE COMMISSION

 

            The Commission heard this matter on September 14, 2015, at the Western State Colorado University, University Center, South Ballroom, 600 North Adams Street, Gunnison, Colorado upon application for an order to: 1) vacate two approximate 640-acre drilling and spacing units established by Order Nos. 421-1 and 421-3 for Section 5, Township 11 North, Range 63 West, 6th P.M. and Section 32, Township 12 North, Range 63 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation; 2) modify Order No. 421-59 to include the Niobrara Formation in the approximate 1280-acre drilling and spacing unit previously established for Section 5, Township 11 North, Range 63 West, 6th P.M. and Section 32, Township 12 North, Range 63 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Codell Formation; and 3) approve up to eight horizontal wells within the approximate 1280-acre drilling and spacing unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Extraction Oil & Gas, LLC (Operator No. 10459) (“Extraction” 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.     On February 22, 2010, the Commission entered Order No. 421-1 which established 58 approximate 640-acre drilling and spacing units and approved one (1) horizontal well within each unit for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.  Section 5, Township 11 North, Range 63 West, 6th P.M. is subject to this Order for the Niobrara Formation.

 

5.         On October 21, 2010, the Commission entered Order No. 421-3 which established 83 approximate 640-acre drilling and spacing units and approved one (1) horizontal well within each unit for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.  Section 32, Township 12 North, Range 63 West, 6th P.M. is subject to this Order for the Niobrara Formation.

 

6.         On December 15, 2014, the Commission entered Order No. 421-59 which established an approximate 1,280-acre drilling and spacing unit for the Application Lands, for the production of oil, gas and associated hydrocarbons from the Codell Formation, and approved up to four (4) horizontal wells within the unit and the treated interval of the wellbore shall be no closer than 600 feet from the treated 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 permit application granted the right to locate the treated interval of the wellbore no closer than 300 feet from a unit boundary, without exception being granted by the Director.  If the Commission has not at the time of the drilling permit application granted to owners of adjacent or cornering lands the right to locate the treated interval of the wellbore no closer than 300 feet from a unit boundary, then the treated interval of the wellbore shall be located no closer than the distance permitted in the adjacent or cornering lands, without exception being granted by the Director.  

 

7.         July 16, 2015, amended August 5, 2015, Extraction, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to: 1) vacate two approximate 640-acre drilling and spacing units established by Order Nos. 421-1 and 421-3 for Section 5, Township 11 North, Range 63 West, 6th P.M. and Section 32, Township 12 North, Range 63 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation; 2)  modify Order No. 421-59 to include the Niobrara Formation in an approximate 1280-acre drilling and spacing unit previously established for the below-described lands (“Application Lands”) for the production of oil, gas and associated hydrocarbons from the Codell Formation; and 3) to approve up to eight horizontal wells within the drilling and spacing unit, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations, with the productive interval of each wellbore to be no closer than 600 feet from the east and west unit boundaries and 300 feet from the north and south unit boundaries, without exception being granted by the Director:

 

Township 11 North, Range 63 West, 6th P.M.

Section 5:        All

 

Township 12 North, Range 63 West, 6th P.M.

Section 32:      All

 

8.         On August 25, 2015, Extraction, 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 Drew Stout, Land Manager for Extraction, showed that Extraction holds oil and gas leasehold interests and has a right to drill in the Application Lands.            

 

10.       Geologic testimony and exhibits submitted in support of the Application by Matt Volkmer, Petroleum Engineer for Extraction, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 265 to 285 feet thick, and is generally of uniform thickness throughout the Application Lands  The testimony further showed that the Codell Formation is present throughout the Application Lands, is approximately 20 feet thick, and is generally of uniform thickness throughout the Application Lands.

 

11.       Engineering testimony and exhibits submitted in support of the Application by John Tonello, Engineering Manager for Extraction, showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 18.6 acres, and an approximate 1280-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by a horizontal well producing oil, gas and associated hydrocarbons from the Niobrara Formation.  The testimony further showed that the drainage area for analog horizontal Codell Formation wells is estimated at 114.2 acres, and an approximate 1280-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by a horizontal well producing oil, gas and associated hydrocarbons from the Codell Formation.

 

12.       Applicant further requested that the Commission take administrative notice of the 511 testimony provided by Whiting Oil & Gas Corporation in Docket No. 150400206, Order No. 535-655.  Applicant contends that Whiting Exhibits E-5 through E-8 provide evidential support for reduced setbacks below the 300’ unit boundary setbacks requested.  Applicant further requested that the Commission take administrative notice of the 511 testimony provided by Carizzo Oil & Gas, Inc. in Docket No. 150100071, Order No. 535-631.  Applicant contends that Carizzo Exhibit E-6 provides evidential support for reduced unit boundary setbacks of 300’ as requested in the Application.

 

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.       Extraction 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 two approximate 640-acre drilling and spacing units established by Order Nos. 421-1 and 421-3 for Section 5, Township 11 North, Range 63 West, 6th P.M. and Section 32, Township 12 North, Range 63 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation; 2) modify Order No. 421-59 to include the Niobrara Formation in the approximate 1280-acre drilling and spacing unit previously established for Section 5, Township 11 North, Range 63 West, 6th P.M. and Section 32, Township 12 North, Range 63 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Codell Formation; and 3) approve up to eight horizontal wells within the approximate 1280-acre drilling and spacing unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.         Two approximate 640-acre drilling and spacing units established by Order Nos. 421-1 and 421-3 for Section 5, Township 11 North, Range 63 West, 6th P.M. and Section 32, Township 12 North, Range 63 West, 6th P.M.,  are hereby vacated, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

 

2.      Order No. 421-59 is hereby modified to include the Niobrara Formation in the approximate 1280-acre drilling and spacing unit established for the below-described lands, and a total of up to eight horizontal wells within the unit are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations:

 

Township 11 North, Range 63 West, 6th P.M.

Section 5:        All

 

Township 12 North, Range 63 West, 6th P.M.

Section 32:      All

 

3.         Order No. 421-59 is hereby modified as to Section 5, Township 11 North, Range 63 West, 6th P.M. and Section 32, Township 12 North, Range 63 West, 6th P.M., to provide 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 Niobrara or Codell Formations, and no closer than 600 feet from the east and west unit boundaries and 300 feet from the north and south unit boundaries, 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 18th day of September, 2015, as of September 14, 2015.

 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By__________________________________

            Julie Murphy, Secretary