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 IN AN HEREFORD FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 421

 

ORDER NO. 421-8

 

 

REPORT OF THE COMMISSION

 

                        This cause came on for hearing before the Commission on April 4, 2011, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to approve an additional horizontal well, for a total of up to three horizontal wells, for the approximate 640-acre drilling and spacing unit established for Section 36, Township 12 North, Range 63 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

 

FINDINGS

 

The Commission finds as follows:

 

1.     EOG Resources, Inc. (“EOG” 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, the Commission entered Order No. 421-1, which among other things, established an approximate 640-acre drilling and spacing unit for Section 36, Township 12 North, Range 63 West, 6th P.M., and approved of one horizontal well in said unit, for the production of oil and associated hydrocarbons from the Niobrara Formation, with the horizontal leg of the permitted well to be no closer than 600 feet to the outside boundary of the drilling unit and the terminus of the horizontal leg no closer than 600 feet to the outside boundary of the drilling and spacing unit, without exception being granted by the Director of the Commission.

 

5.     On April 29, 2010, the Commission entered Order No. 421-2, which among other things, approved of an additional horizontal well, up to two total horizontal wells, from a common pad in an approximate 640-acre drilling and spacing unit established for Section 36, Township 12 North, Range 63 West, 6th P.M., for the production of oil and associated hydrocarbons from the Niobrara Formation, with the horizontal leg of the permitted well to be no closer than 600 feet to the outside boundary of the drilling unit and the terminus of the horizontal leg no closer than 600 feet to the outside boundary of the drilling and spacing unit, without exception being granted by the Director of the Commission.

 

6.         On February 2, 2011, EOG, by its attorneys, filed with the Commission a verified application (the “Application”) for an order to approve an additional horizontal well, for a total of up to three horizontal wells, for the approximate 640-acre drilling and spacing unit established for the below-listed lands, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the horizontal leg of the additional well to be no closer than 600 feet to the outside boundary of the drilling unit and the terminus of the horizontal leg no closer than 600 feet to the outside boundary of the drilling and spacing unit with no inter-well setback required, without exception being granted by the Director of the Commission:

 

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

Section 36:

All

 

7.     On March 22, 2011, EOG, 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 as is provided for by Rule 511.  Sworn written testimony and exhibits were submitted in support of the Application.

 

8.     Land testimony and exhibits submitted in support of the Application by Jason McLaren, Landman for EOG, showed that EOG has 100% leasehold ownership in the application lands, that the minerals underlying the application lands are owned by the State of Colorado, that the surface of the application lands is owned by the State of Colorado.   

 

9.     Geology testimony and exhibits submitted in support of the Application by John Melby, Petroleum Geologist for EOG, showed that the Niobrara Formation is a sequence of chalks, marls, and limestones deposited as deep water sediments in the Western Interior Seaway during the Cretaceous period that underlies most of the Denver-Julesburg Basin in parts of northeastern Colorado, southeastern Wyoming, and southwestern Nebraska.  Additional testimony and exhibits showed that the total thickness from the top of the Niobrara Formation to the top of the Codell Formation underlying the Application Lands is approximately 274 to 282 feet with a regional dip of approximately 35 feet per mile to the west.  Further testimony and exhibits showed that the Niobrara Formation consists of two members, the Smoky Hill Chalk and the Ft Hayes Limestone.  Further testimony and exhibits demonstrated that the Niobrara Formation exists under the application lands and is a common source of supply. 

 

10.   Engineering testimony and exhibits submitted in support of the Application by Osman Apaydin, Reservoir Engineer for EOG, showed that EOG has drilled and completed two horizontal wells on the application lands, and the estimate ultimate recovery (“EUR) from those wells will range between 90,000 to 98,000 barrels of oil.  It is estimated that the original oil-in-place (“OOIP”) for the application lands is between 1,800,000 and 1,960,000 barrels of oil.  Two wells producing near the application lands, namely, the Jake 2-01H and Elmer 8-31H wells, have much higher EUR and OOIP; 280,000 and 220,000 BBL EUR, and 5,600,000 and 4,400,000 barrels of oil OOIP, respectively.  Further testimony indicated that estimated drainage areas for the two neighboring wells is between 156 acres to 198 acres. Testimony showed that the projected EUR’s and drainage areas of these presented wells indicated that the fractured nature of the Niobrara Formation will play a dominant role in reserves recovery in each section.  It is represented by EOC that the Application is part of an effort to test tighter spacing in an area where production response with these various techniques has been variable and indicates that down spacing could be warranted, and the third well drilled under the Application will help determine incremental recovery potential and prevent waste and confirm if original 640-acre spacing unit is adequate to effectively drain the whole section where production response has been variable.  Testimony indicated that the additional well in the drilling and spacing unit will promote efficient drainage, will protect correlative rights, will avoid waste, and will lead to an increase in the ultimate recovery of hydrocarbons and will not adversely affect correlative rights.    

 

11.   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 gas, and will not violate correlative rights.

 

12.   EOG agreed to be bound by oral order of the Commission. 

 

13.   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 approving an additional horizontal well, for a total of up to three horizontal wells, for the approximate 640-acre drilling and spacing unit established for Section 36, Township 12 North, Range 63 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

 

ORDER

 

NOW, THEREFORE IT IS ORDERED, that an additional horizontal well, up to a total of three horizontal wells, is hereby approved for the below-listed lands, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation:

 

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

Section 36:

All

 

IT IS FURTHER ORDERED, that the horizontal leg of the additional well to be no closer than 600 feet to the outside boundary of the drilling unit and the terminus of the horizontal leg no closer than 600 feet to the outside boundary of the drilling and spacing unit with no inter-well setback required, without exception being granted by the Director of the Commission.

 

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective immediately.

           

                        IT IS FURTHER ORDERED, that the Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.

 

                        IT IS FURTHER ORDERED, that under the State Administrative Procedure Act the Commission considers this Order to be final agency action for purposes of judicial review within 30 days after the date this Order is mailed by the Commission.

 

                        IT IS FURTHER ORDERED, that an application for reconsideration by the Commission of this Order is not required prior to the filing for judicial review.

 

                        ENTERED this   15th  day of April, 2011, as of April 4, 2011.

 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By____________________________________    

                                                                                    Robert A. Willis, Acting Secretary

 

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

April 15, 2011