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 MESAVERDE FORMATION, BRUSH CREEK FIELD, MESA COUNTY, COLORADO

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CAUSE NO. 429

 

DOCKET NO. 160800361

 

ORDER NO. 429-15

 

TYPE: SPACING

 

REPORT OF THE COMMISSION

 

The Commission heard this matter on August 29, 2016, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to establish an approximate 716.98-acre drilling and spacing unit for Section 1, Township 8.5 South, Range 94 West, 6th P.M., and Section 1, Township 9 South, Range 94 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Mesaverde Formation, including the Williams Fork and Iles Formations, Cameo, Rollins, Cozette and Corcoran Formations (collectively “Mesaverde Formation”).

 

FINDINGS

 

The Commission finds as follows:

 

1.         Laramie Energy, 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 it has jurisdiction to promulgate the hereinafter prescribed order pursuant to the Oil and Gas Conservation Act.

 

4.         Rule 318.a. of the Rules and Regulations of the Oil and Gas Conservation Commission requires that, on unspaced lands, wells drilled in excess of 2,500 feet in depth be located not less than 600 feet from any lease line, and located not less than 1,200 feet from any other producible or drilling oil or gas well when drilling to the same common source of supply.

 

5.         On May 20, 1985, the Commission entered Order No. 429-1 which established 160-acre drilling and spacing units for certain lands including portions of Section 1, Township 9 South, Range 94 West, 6th P.M., for the production of gas and associated hydrocarbons from the Mesaverde Formation (including the Cozette-Corcoran Sandstones).

6.         On December 6, 2005, the Commission entered Order No. 429-3 which approved up to three additional wells to be optionally drilled and completed in the 160-acre drilling and spacing unit consisting of the SE¼ of Section 1, Township 9 South, Range 94 West, 6th P.M., for the production of gas and associated hydrocarbons from the Mesaverde Formation. 

7.         On June 6, 2006, the Commission entered Order No. 429-4 which allowed for the equivalent of one well per 10 acres to be optimally drilled within each approximate 160-acre drilling and spacing unit in Section 1, Township 8.5 South, Range 94 West, with the permitted well to be located no closer than 100 feet from the unit boundary, or 200 feet from the exterior unit boundaries if the wells abutted or cornered lands not subject to 10-acre density for the production of gas and associated hydrocarbons from the Mesaverde Formation, including the Williams Fork, Rollins, Cozette and Corcoran Formations, without exception granted by the Director. 

8.         On December 12, 2007, the Commission entered Order No. 429-6 which allowed for the equivalent of one well per 10 acres to be optimally drilled for certain lands including portions of Section 1, Township 9 South, Range 94 West, 6th P.M., for the production of gas and associated hydrocarbons from the Mesaverde Formation, including the Williams Fork, Rollins, Cozette and Corcoran Formations, with the permitted well to be located no closer than 100 feet from the lease line, or 200 feet from the lease line if the wells abutted or cornered lands not subject to 10-acre density for the production of gas and associated hydrocarbons from the Mesaverde Formation, including the Williams Fork, Rollins, Cozette and Corcoran Formations, without exception granted by the Director.

9.         On June 30, 2016, Laramie, by its attorneys, filed a verified Application (“Application”) pursuant to §34-60-106, C.R.S., for an order to: 1) vacate Order Nos. 429-1, 429-3, 429-4 and 429-6 insofar as they apply to the Section 1, Township 8.5 South, Range 94 West, 6th P.M., and Section 1, Township 9 South, Range 94 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Mesaverde Formation, including the Williams Fork and Iles Formations, Cameo, Rollins, Cozette and Corcoran Formations (collectively “Mesaverde Formation”); 2) establish an approximate 716.98-acre drilling and spacing unit within the below-described lands (“Application Lands”), for the production of oil, gas and associated hydrocarbons from new wells producing from the Mesaverde Formation; 3) approve the equivalent of one well per 10-acre density for all wells producing from the Mesaverde Formation within the Application Lands; and 4) approve the drilling of the wells producing from the Mesaverde Formation within the Application Lands from no more than one well pad per quarter quarter section and that each well be located no closer than 100 feet from the exterior boundaries of the Application Lands or 200 feet from the exterior boundaries of the Application Lands if the Application Lands abut or corner lands not subject to 10-acre density, without exception being granted by the Director:

 

Township 8.5 South, Range 94 West, 6th P.M. 

Section 1:        Lot 1 (20.88), Lot 2 (19.40),

Lot 3 (17.92), Lot 4 (16.42)

 

Township 9 South, Range 94 West, 6th P.M. 

Section 1:        Lot 1 (40.15), Lot 2 (40.44),

Lot 3 (40.74), Lot 4 (41.03), S½N½, S½

 

10.       On August 8, 2016, Laramie, by its attorneys, filed a request to approve the Application based on the merits of the verified Application and the supporting exhibits.  Sworn testimony and exhibits were submitted in support of the Application.

 

11.       Laramie has agreed to cooperate with the Bureau of Land Management (“BLM”) with respect to its operations relating to federal lands and minerals. Specifically, Laramie agreed that the drilling and spacing unit contains federal leased and/or unleased minerals and one existing well.   As such, Laramie, the operator of the existing well within the drilling and spacing unit, agrees to submit a Communitization Agreement (“CA”) to the BLM for the existing well within 60 days of the entry of this order. The “Effective Date” of the CA will be the first day of the month after this order is entered by the Commission.  The CA will be prospective.  The CA will only apply to operation of the existing well and new wells after the Effective Date.

 

12.       Land testimony and exhibits submitted in support of the Application by Barbara A. Hinman, Senior Landman for Laramie, showed that Laramie holds oil and gas leasehold and mineral interests and has a right to drill in the Application Lands. 

 

13.       Geology testimony and exhibits submitted in support of the Application by Andrew T. McCarthy, Senior Geologist for Laramie, showed that the Brush Creek Field, Mesaverde Formation, including Williams Fork and Iles Formations (including the Cameo, Rollins, Cozzette and Corcoran Formations) consists of sand bodies that are highly discontinuous in nature, and wells drilled on 10-acre density will therefore statistically be unlikely to encounter the same sand bodies.  Establishing the proposed drilling and spacing units will allow for optimal bottom hole well placement necessary to develop the Williams Fork and Iles Formations underlying the Application Lands. 

 

14.    Engineering testimony and exhibits submitted in support of the Application by Tyler J. Peters, Senior Reservoir Engineer for Laramie showed that an approximate 716.98-acre drilling and spacing unit consisting of the Application Lands is not less than the maximum area which can be efficiently, economically and effectively drained by a well producing oil, gas and associated hydrocarbons from the Mesaverde Formation, and development of the Mesaverde Formation as an approximate 716.98-acre drilling and spacing unit composed of the Application Lands with the proposed field rules will serve to prevent waste and be an efficient manner of draining the reservoirs.

 

15.       The above-referenced testimony and exhibits show that granting the Application will allow for more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of hydrocarbons and will not violate correlative rights.

 

16.       Laramie has agreed to be bound by oral order of the Commission.

 

17.       Based on the facts stated in the Application, having received no protests, and based on the Hearing Officer’s review of the Application under Rule 511, the Commission should enter an order to establish an approximate 716.98-acre drilling and spacing unit for Section 1, Township 8.5 South, Range 94 West, 6th P.M., and Section 1, Township 9 South, Range 94 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Mesaverde Formation.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.         Order Nos. 429-1, 429-3, 429-4, and 429-6 are hereby vacated, as they apply to Section 1, Township 8.5 South, Range 94 West, 6th P.M., and Section 1, Township 9 South, Range 94 West, 6th P.M., for the production of gas and associated hydrocarbons from the Mesaverde Formation.

 

2.         An approximate 716.98-acre drilling and spacing unit for the below-described lands, is hereby established, and the equivalent of one well per 10-acre density for all wells producing within the unit, is hereby approved, for the production of oil, gas and associated hydrocarbons from new wells in the Mesaverde Formation, including the Williams Fork and Iles Formations, Cameo, Rollins, Cozette and Corcoran Formations (collectively “Mesaverde Formation”):       

 

Township 8.5 South, Range 94 West, 6th P.M. 

Section 1:        Lot 1 (20.88), Lot 2 (19.40),

Lot 3 (17.92), Lot 4 (16.42)

 

Township 9 South, Range 94 West, 6th P.M. 

Section 1:        Lot 1 (40.15), Lot 2 (40.44),

Lot 3 (40.74), Lot 4 (41.03), S½N½, S½

 

2.         All wells within the unit will be located no closer than 100 feet from the unit boundary line, or 200 feet from the unit boundary line if the unit abuts or corners lands not subject to 10-acre density, unless an exception is granted by the Director.

 

3.         All wells within the unit will be drilled from no more than one wellpad per quarter quarter section.

 

4.         The drilling and spacing unit contains federal leased and/or unleased minerals and one existing well.   As such, Laramie, the operator of the existing well within the drilling and spacing unit, agrees to submit a Communitization Agreement (“CA”) to the BLM for the existing well within 60 days of the entry of this order. The “Effective Date” of the CA will be the first day of the month after this order is entered by the Commission.  The CA will be prospective.  The CA will only apply to operation of the existing well and new wells after the Effective Date.

 

IT IS FURTHER ORDERED:

 

1.         The provisions in the above order shall become effective immediately.

 

2.         The Commission 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 Procedures 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 1st day of September, 2016, as of August 29, 2016.

 

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By____________________________________       

Julie Murphy, Secretary