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 THE BUZZARD CREEK FIELD, MESA COUNTY, COLORADO

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CAUSE NO. 369 & 429

 

ORDER 369-9 & 429-14

 

 

REPORT OF THE COMMISSION

 

The Commission heard this matter on January 23, 2012, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, upon application for an order to: 1) establish an approximate 160-acre drilling and spacing unit the for the Williams Fork, Iles,  Mancos, Niobrara, Frontier and Mowry Formations in Section 17, Township 9 South, Range 93 West, 6th P.M.; and 2) approve the equivalent of one well per 10 acres for the Williams Fork and Iles Formations, subject to the well location and setback requirements of Order 369-5; and 3) approve the equivalent of one well per 10 acres for the Mancos, Niobrara, Frontier and Mowry Formations, for the production of oil, gas and associated hydrocarbons from the Williams Fork and Iles Formations of the Mesaverde Group, and also the Mancos, Niobrara, Frontier and Mowry Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.    Laramie Energy II, LLC (“Laramie” 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 September 22, 2008, the Commission issued Order No. 369-5, which among other things, approved one well per 10 acres for production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.  Order 369-5 provides for downhole locations anywhere within designated lands but no closer than 100 feet from a lease line or the boundaries of said designated lands, unless the lands abut or corner lands in respect of which the Commission has not granted 10-acre density to the Williams Fork and Iles Formations, in which case the downhole location is required to be 200 feet from such boundaries.  Section 17, Township 9 South, Range 93 West, 6th P.M. is subject to this order.

 

5.    Rule 318.a. provides that wells to be drilled 2,500 feet in depth or greater shall be located not less than 600 feet from any lease line, and shall not be located less than 1,200 feet from any other producible or drilling well when drilling to the same common source of supply, unless authorized by order of the Commission upon hearing.  Section 17, Township 9 South, Range 93 West, 6th P.M. is subject to this rule for the Mancos, Niobrara, Frontier and Mowry Formations (“Deep Formations”).

 

6.    On November 23, 2011, Laramie, by its attorneys, filed with the Commission a verified application (“Application”) for an order to: 1) establish one approximate 160-acre drilling and spacing unit the for the Williams Fork, Iles and Deep Formations in the below-listed lands (“Application Lands”); 2) approve the equivalent of one well per 10-acres for the Williams Fork and Iles Formations, subject to the well location and setback requirements of Order 369-5; and 3) approve the equivalent of one well per 10-acres for the Deep Formations, for the production of oil, gas and associated hydrocarbons from the Williams Fork and Iles Formations of the Mesaverde Group, and also the Deep Formations.

 

Township 9 South, Range 93 West, 6th P.M.

Section 17:    SW¼

 

7.    On January 9, 2012, Laramie, 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.    Land testimony and exhibits submitted in support of the Application by Mark R. Petry, Vice President of Business Development for Laramie, showed that the Commission has granted 10-acre density for wells to the Mesaverde Group in the vicinity of the Application Lands.

 

9.    Geologic testimony and exhibits submitted in support of the Application by Mark King, Geological and Geophysical Manager for Laramie, showed: 1) The Williams Fork and Iles Formations of the Mesaverde Group underlie and are drilling objectives for wells drilled on the Application Lands; and 2) outcrop studies have shown, and well logs confirm, the sand bodies are highly discontinuous in nature.  The testimony concludes wells drilled on 10 acre density will statistically not encounter the same sand bodies.

 

10.  Engineering testimony and exhibits submitted in support of the Application by Robert G. Hea, Vice President of Engineering and Operations for Laramie, showed the Application Lands are surrounded by acreage approved for 10-acre density drilling for the Williams Fork and Iles Formations, and that no known differences exist in the reservoirs between the Application Lands and the areas already approved for 10-acre density.  The testimony further stated drilling at 20-acre density in the Deep Formations would leave significant undrained areas behind and create waste.  Developing both the Williams Fork and Iles Formations at the same time as the Deep Formations will incur only an incremental drilling cost, and permit the most efficient and unobtrusive method to recover these reserves, and would not result in the drilling of unnecessary wells.

 

11.  The Application was reviewed by the Colorado Department of Public Health and Environment (“CDPHE”) pursuant to consultation provisions of Rule 306.d.  In a letter dated January 6, 2012, the CDPHE Oil & Gas Coordinator indicated that CDPHE does not believe any additional conditions of approval are necessary for approving the Application.

 

12.  On January13, 2012, Laramie conferred with the Bureau of Land Management (BLM) concerning the Application. While both Laramie and BLM agree that Order No. 369-05 only applies to the Williams Fork and Iles Formations, Laramie agreed to affirm this understanding in this order. The Commission also agrees with this interpretation.  This Order will not impact Order No. 369-05.

 

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.  Laramie 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) establish one approximate 160-acre drilling and spacing unit the for the Williams Fork, Iles and Deep Formations in Section 17, Township 9 South, Range 93 West, 6th P.M.; and 2) approve the equivalent of one well per 10-acres for the Williams Fork and Iles Formations, subject to the well location and setback requirements of Order 369-5; and 3) approve the equivalent of one well per 10-acres for the Deep Formations, for the production of oil, gas and associated hydrocarbons from the Williams Fork and Iles Formations of the Mesaverde Group, and also the Deep Formations.

 

ORDER

 

NOW, THEREFORE IT IS ORDERED, that: 1) one approximate 160-acre drilling and spacing unit, is hereby established, the for the Williams Fork, Iles and Deep Formations in the below-listed lands; 2) the equivalent of one well per 10-acres for the Williams Fork and Iles Formations, is hereby approved, subject to the well location and setback requirements of Order 369-5; and 3) the equivalent of one well per 10-acres for the Deep Formations, is hereby approved, for the production of oil, gas and associated hydrocarbons from the Williams Fork and Iles Formations of the Mesaverde Group, and also the Deep Formations:

 

 

Township 9 South, Range 93 West, 6th P.M.

Section 17:    SW¼

IT IS FURTHER ORDERED, that the Commission shall allow all future Deep Formation wells in the Application lands to be located downhole anywhere on such lands, but no closer than 600 feet from the boundaries of the unit, unless such boundary abuts or corners lands in respect of which the Commission has, at the time of drilling permit application, granted the right to drill 10-acre density wells in the Deep Formations, in which event any well to such Deep Formations shall be drilled downhole no closer than 100 feet, or the setback footage in such other Deep Formations order, whichever is greater, from that portion of such boundary which so abuts or corners the lands in respect of which 10-acre density downhole drilling for Deep Formation wells has been ordered by the Commission, without exception being granted by the Commission. 

IT IS FURTHER ORDERED, that well density and location rules of this Order shall apply to vertical and directional wells only. Horizontal wells shall remain subject to existing Rules and Orders, unaffected by this Order.

IT IS FURTHER ORDERED, that wells to be drilled under this Order shall be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter-quarter section (or lots or parcels approximately equivalent thereto) unless exception is granted by the Director.

 

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   26th  day of January, 2012, as of January 23, 2012.

           

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By____________________________________         

                                                                                    Peter J. Gowen, Acting Secretary

 

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

January 26, 2012