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 CODELL AND NIOBRARA FORMATIONS, HEREFORD FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 421
DOCKET NO. 170500241
TYPE: SPACING
ORDER NO. 421-89 |
REPORT OF THE COMMISSION
The Commission heard this matter on May 1, 2017, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado upon application for an order to: 1) vacate an approximate 640-acre drilling and spacing unit established by Order No. 421-3 for Section 12, Township 11 North, Range 62 West, 6th P.M., for production of oil, gas and associated hydrocarbons from the Niobrara Formation; 2) establish an approximate 1,280-acre drilling and spacing unit for Sections 12 and 13, Township 11 North, Range 62 West, 6th P.M., and approve up to 12 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations; and 3) vacate an approximate 640-acre drilling and spacing unit established by Order No. 421-3 for Section 13, Township 11 North, Range 62 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, and bring the Gallegos PC GK 13-99HZ Well (API #05-123-31644) into the proposed approximate 1280-acre drilling and spacing unit.
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 October 20, 2010, the Commission issued Order No. 421-3 which, among other things, established an approximate 640-acre drilling and spacing units for Sections 12 and 13, Township 11 North, Range 62 West, 6th P.M., and authorized the drilling of one horizontal well within said units, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of any permitted well located no closer than 600 feet from the unit boundaries.
5. On March 24, 2017, Extraction, by its attorneys, filed with the Commission a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to: 1) vacate an approximate 640-acre drilling and spacing unit established by Order No. 421-3 for Section 12, Township 11 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 the below-described lands (“Application Lands”) and approve up to 12 horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations, with the productive interval of the wellbore to be located no closer than 300 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; and 3) vacate an approximate 640-acre drilling and spacing unit established by Order No. 421-3 for Section 13, Township 11 North, Range 62 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, and bring the Gallegos PC GK 13-99HZ Well (API #05-123-31644) into the proposed approximate 1280-acre drilling and spacing unit:
Township 11 North, Range 62 West, 6th P.M.
Section 12: All
Section 13: All
6. Applicant states that any horizontal wells to be drilled under this Application will be drilled from no more than two multi-well pads within the drilling and spacing unit, or on adjacent lands with surface owner consent, without exception being granted by the Director.
7. On April 10, 2017, supplemented April 18, 2017, 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.
8. On April 25, 2017, Extraction, by its attorneys, and the Bureau of Land Management (BLM) agreed that the Application Lands contain federal minerals. As such, Extraction agreed to submit a Communitization Agreement to the BLM least 90 days before the anticipated date of first production (as defined in the Commission’s Rules) from the initial well drilled within the drilling and spacing unit for the Application Lands.
9. Land testimony and exhibits submitted in support of the Application by Sean Flanagan, Landman for Extraction, showed that Extraction holds oil and gas leasehold interests and has a right to drill in the Application Lands.
10. Land testimony further showed that 8 North LLC (Operator No. 10575) presently operates the Gallegos PC GK 13-99HZ Well (API #05-123-31644), a Niobrara Formation horizontal well running diagonally from its surface location in the NW¼NW¼ of Section 13, Township 11 North, Range 62 West, 6th P.M., to its bottom-hole location in the SE¼SE¼ of Section 13, Township 11 North, Range 62 West, 6th P.M., and currently allocates production on a 640-acre unit basis pursuant to Commission Order No. 421-3. In addition, land testimony was that the Gallegos PC GK 13-99HZ Well should be brought into the 1,280-acre drilling and spacing unit proposed for the Application Lands, as of the initial date of completion operations associated with the first well completed under the approved Application, changing allocation of production to an approximate 1,280-acre unit basis.
11. Geologic testimony and exhibits submitted in support of the Application by Alicia Branch, Geologic Consultant for Extraction, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 297 to 300 feet thick, and is generally of uniform thickness throughout the Application Lands. Further testimony showed that the Niobrara Formation is a sequence of chalks, marls and limestones and is a common source of supply. Geologic testimony also showed that the Codell Formation is present throughout the Application Lands, is approximately 18 to 20 feet thick, and is generally of uniform thickness throughout the Application Lands. Further testimony showed that the Codell Formation is made up of sandstone and is a common source of supply.
12. Engineering testimony and exhibits submitted in support of the Application by Boyd McMaster, Petroleum Engineer for Extraction, showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 96 acres, and an approximate 1,280-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. Engineering testimony also showed that the drainage area for analog horizontal Codell Formation wells is estimated at 272 acres, and an approximate 1,280-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.
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 an approximate 640-acre drilling and spacing unit established by Order No. 421-3 for Section 12, Township 11 North, Range 62 West, 6th P.M., for production of oil, gas and associated hydrocarbons from the Niobrara Formation; 2) establish an approximate 1,280-acre drilling and spacing unit for Sections 12 and 13, Township 11 North, Range 62 West, 6th P.M., and approve up to 12 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations; and 3) vacate an approximate 640-acre drilling and spacing unit established by Order No. 421-3 for Section 13, Township 11 North, Range 62 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, and bring the Gallegos PC GK 13-99HZ Well (API No. 05-123-31644) into the proposed approximate 1,280-acre drilling and spacing unit.
ORDER
IT IS HEREBY ORDERED:
1. An approximate 640-acre drilling and spacing unit established by Order No. 421-3 for Section 12, Township 11 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 a total of up to 12 horizontal wells within the unit are hereby approved, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations:
Township 11 North, Range 62 West, 6th P.M.
Section 12: All
Section 13: All
3. The productive interval of the wellbore will be located no closer than 300 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore producing from the same source of supply within the unit, unless the Director grants an exception.
4. All wells permitted under this Order shall be drilled from no more than two multi-well pads within the Application Lands, or on adjacent lands with surface owner consent, unless the Director grants an exception.
5. Order No. 421-3 is hereby amended to provide that for Section 13, Township 11 North, Range 62 West, 6th P.M., it is applicable only to the Gallegos PC GK 13-99HZ Well (API No. 05-123-31644). No additional wells shall be drilled in the approximate 640-acre drilling and spacing unit created by Order No. 421-3 for Section 13, Township 11 North, Range 62 West, 6th P.M. The Gallegos PC GK 13-99HZ Well shall continue paying to the approximate 640-acre drilling and spacing unit created by Order No. 421-3 until the date of commencement of completion operations on the first horizontal well approved by this Order, at which time it will be brought into the approximate 1,280-acre drilling and spacing unit created by this Order. Upon bringing the Gallegos PC GK 13-99HZ Well into the approximate 1,280-acre drilling and spacing unit created by this Order, the 640-acre drilling and spacing unit established by Order No. 421-3 for Section 13, Township 11 North, Range 62 West, 6th P.M., for production of oil, gas and associated hydrocarbons from the Niobrara Formation shall be deemed vacated.
6. Extraction shall submit a Communitization Agreement to the BLM at least 90 days before the anticipated date of first production (as defined in the Commission’s Rules) from the initial well drilled within the drilling and spacing unit for the above described lands.
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 10th day of May, 2017, as of May 1, 2017.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Peter Gowen, Acting Secretary