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 MESAVARDE FORMATION, BRUSH CREEK FIELD, MESA COUNTY, COLORADO

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CAUSE NO. 429

 

DOCKET NO. 161000405

 

TYPE: SPACING

 

ORDER NO. 429-16

 

REPORT OF THE COMMISSION

The Commission heard this matter on October 24, 2016, at the Northeastern Junior College, Hayes Student Center Ballroom, 100 College Avenue, Sterling, Colorado, upon application for an order to establish an approximate 640-acre drilling and spacing unit, for the production of oil, gas and associated hydrocarbons from the Mesaverde Formation, including the Williams Fork and Iles Formations, Cameo, Rollins, Cozzette 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 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 the Application Lands and other nearby lands, 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, Cozzette and Corcoran Formations, without exception granted by the Director. 

6.         On August 25, 2016, Laramie, by its attorneys, filed a verified Application (“Application”) pursuant to §34-60-116, C.R.S., for an order to:  1) vacate Order 429-4 insofar as it applies to the production of oil, gas and associated hydrocarbons from the Mesaverde Formation, including the Williams Fork and Iles Formations, Cameo, Rollins, Cozzette and Corcoran Formations (collectively “Mesaverde Formation”) for Section 24, Township 9 South, Range 94 West, 6th P.M.; 2) establish an approximate 640-acre drilling and spacing unit for the below-described lands (“Application Lands”), for the production of oil, gas and associated hydrocarbons from new wells producing from the Mesaverde Formation, and approve the equivalent of one well per 10-acre density for new wells producing from the Mesaverde Formation, unless an exception is granted by the Director, 3) require that all wells producing from the Mesaverde Formation 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, unless an exception is granted by the Director.

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

Section 24:  All

 

Applicant states that the wells subject to this Application will be drilled, subject to the approval of the Surface Owner, from the existing well pad and up to two additional well pads in the SW¼NE¼ of the Application Lands or, alternatively, if the approval of the Surface Owner is not obtained, from no more than one well pad per quarter quarter section within the Application Lands, unless an exception is granted by the Director.

7.         On October 3, 2016, Laramie, by its attorneys, filed a request to approve the Application based on the merits of the Application and the supporting exhibits.  Sworn testimony and exhibits were submitted in support of the Application.

8.         On or about October 10, 2016, Laramie agreed to cooperate with the Bureau of Land Management with respect to its operations relating to federal lands and minerals.  Laramie, as the operator of the existing wells within the drilling and spacing unit, agrees to submit a Communitization Agreement (“CA”) to the BLM for the existing wells 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 wells and new wells after the effective date.

9.         Land testimony and exhibits submitted in support of the Application by Barbara A. Hinman, Senior Landman for Laramie and an expert in land issues, showed that Laramie holds oil and gas leasehold and has a right to drill in the Application Lands.  The Application Lands feature relatively steep and unstable terrain, especially in the S½ of the Application Lands, as depicted in the map attached as Exhibit L-4.  The most favorable location within the proposed drilling and spacing unit to locate, drill and operate wells capable of reaching all legal locations within the Application Lands are the lands in the SW¼NE¼.  Subject to the approval of the Surface Owner, wells producing from the Mesaverde Formation within the Application Lands should be drilled from the existing well pad and up to two additional well pads in the SW¼NE¼ of the Application Lands or, alternatively, if the approval of the Surface Owner is not obtained, from no more than one well pad per quarter quarter section within the Application Lands, unless an exception is granted by the Director.

10.       Geology testimony and exhibits submitted in support of the Application by Andrew T. McCarthy, G&G Manager for Laramie and an expert in geology, 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. 

11.       Engineering testimony and exhibits submitted in support of the Application by Tyler J. Peters, Senior Reservoir Engineer for Laramie and an expert in engineering, showed that an approximate 640-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 a 640-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.

12.       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.

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

14.       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 vacate Order 429-4 insofar as it applies to the production of oil, gas and associated hydrocarbons from the Mesaverde Formation and establish an approximate 640-acre drilling and spacing unit, for the production of oil, gas and associated hydrocarbons from the Mesaverde Formation.

ORDER

IT IS HEREBY ORDERED:

1.         Order No. 429-4 is hereby vacated insofar as it applies to Section 24, Township 9 South, Range 94 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Mesaverde Formation.

2.         An approximate 640-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, which includes the Williams Fork and Iles Formations, which includes, or whose members are the Cameo, Rollins, Cozzette and Corcoran Formations or Members in the following lands in Mesa County, Colorado:           

 

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

Section 24:  All

3.         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.

4.         All wells producing from the Mesaverde Formation within the Application Lands shall be drilled from the existing well pad and up to two additional well pads in the SW¼NE¼ of the Application Lands with surface owner consent or, alternatively, if the approval of the surface owner is not obtained, from no more than one well pad per quarter quarter section within the Application Lands, unless an exception is granted by the Director.

5.         Laramie, as the operator of the existing wells within the drilling and spacing unit, agrees to submit a Communitization Agreement (“CA”) to the BLM for the existing wells 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 wells 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 November, 2016, as of October 24, 2016.

 

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By ______________________________

Julie Murphy, Secretary