BEFORE THE OIL AND GAS
CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE PROMULGATION ) CAUSE NOS. 371 AND 429
AND ESTABLISHMENT OF FIELD RULES TO )
GOVERN OPERATIONS IN THE BRUSH CREEK ) ORDER NOS. 371-4 AND 429-8
FIELD, MESA COUNTY, COLORADO ) CORRECTED
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission at 8:30 a.m. on June 11, 2008, in the Colorado River Room, Two Rivers Convention Center, 159 Main Street, Grand Junction, Colorado, for an order to vacate the 160-acre drilling and spacing unit established in Order No. 371-1 for Section 20, Township 9 South, Range 94 West, 6th P.M. and to extend the provisions of Order No. 429-5 to allow the equivalent of one well per 10 acres, with the permitted well to be located no closer than 100 feet from the lease line in the SEĽ NEĽ of said Section 20, for production of oil and associated hydrocarbons from the Mesaverde Formation (including the Cozzette-Corcoran Sandstones).
The Commission finds as follows:
1. Plains Exploration & Production Co. (“PXP”), 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 May 18, 1981, the Commission issued Order No. 371-1, which among other things, established 160-acre drilling and spacing units for the production of gas from the Mesaverde Formation for certain lands, with the permitted well to be located no closer than 660 feet from the boundaries of the unit, including Section 20, Township 9 South, Range 94 West, 6th P.M.
5. On November 27, 2006, the Commission issued Order No. 429-5, which among other things, allowed the equivalent of one well per 10 acres to be optionally drilled for the production of gas from the Mesaverde Formation (including the Cozzette-Corcoran Sandstones) for certain lands in Section 20, Township 9 South, Range 94 West, 6th P.M., with the permitted well to be located no closer than 100 feet from lease lines, unless 10-acre density has not been granted, whereby wells shall be located no closer than 200 feet from lease lines.
6. On April 21, 2008, PXP, by its attorney, filed with the Commission a verified application to vacate the 160-acre drilling and spacing unit established in Order No. 371-1 for Section 20, Township 9 South, Range 94 West, 6th P.M. and to extend the provisions of Order No. 429-5 to allow the equivalent of one well per 10 acres, with the permitted well to be located no closer than 100 feet from the lease line in the SEĽ NEĽ of said Section 20, for production of oil and associated hydrocarbons from the Mesaverde Formation (including the Cozzette-Corcoran Sandstones).
7. On May 28, 2008, PXP, by its attorney, 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. Testimony and exhibits submitted in support of the application showed that lands in the immediate vicinity of the application lands have been approved for 10-acre density for production of gas and associated hydrocarbons from the Williams Fork and Iles Formations. Additional testimony and exhibits indicated that PXP has a 50% working interest in the application lands, and that there is one surface owner within the application lands with whom PXP has negotiated a surface use agreement.
9. Testimony and exhibits submitted in support of the application showed that the Mesaverde Formation is composed of the Williams Fork and the Iles Formations, which are further composed of the Rollins, Cozzette, and Corcoran Formations. Additional testimony and exhibits showed that the net sand of the Mesaverde Formation is variable in thickness, is lenticular and discontinuous in nature, and that the bottom portion of the Williams Fork Formation is characterized by stacked laterally-continuous coal seams that are most likely the source of the gas in the formation.
10. Testimony and exhibits submitted in support of the application showed that the estimated ultimate recovery per well on a 10-acre density basis is calculated at 0.74 BCF, that with 10-acre well density 80% of the original gas in place will be recovered, and that drilling wells on 10-acre density will be economic. Additional testimony referenced previous exhibits presented in support of 10-acre well density that resulted in the issuance of Order Nos. 429-4, 429-5, 429-6 and 429-7.
11. The above-referenced testimony and exhibits show that drilling Mesaverde Formation wells on a 10-acre density basis for the application lands will allow for more efficient reservoir drainage, will prevent waste, will assure the greatest ultimate recovery of gas and associated hydrocarbons, and will not violate correlative rights.
12. Plains Exploration & Production Co., 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.b., the Commission should enter an order to vacate the 160-acre drilling and spacing unit established in Order No. 371-1 for Section 20, Township 9 South, Range 94 West, 6th P.M. and to extend the provisions of Order No. 429-5 to allow the equivalent of one well per 10 acres, with the permitted well to be located no closer than 100 feet from the lease line in the SEĽ NEĽ of said Section 20, for production of oil and associated hydrocarbons from the Mesaverde Formation (including the Cozzette-Corcoran Sandstones).
ORDER
NOW, THEREFORE IT IS ORDERED, that the 160-acre drilling and spacing unit established in Order No. 371-1 for Section 20, Township 9 South, Range 94 West, 6th P.M. is hereby vacated, and the provisions of Order No. 429-5 are hereby extended to allow the equivalent of one well per 10 acres in the SEĽ NEĽ of said Section 20, for production of oil and associated hydrocarbons from the Mesaverde Formation (including the Cozzette-Corcoran Sandstones).
IT IS FURTHER ORDERED, that the permitted well shall be located no closer than 100 feet from the lease line, and in cases where 10-acre density has not been granted, the permitted well shall be located no closer than 200 feet from lease lines abutting or cornering such lands.
IT IS FURTHER ORDERED, that no more than four (4) Mesaverde Formation wells shall be drilled on the application lands per governmental quarter quarter section, either vertically or directionally, with no more than one pad per quarter quarter section unless the Director grants exception.
IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith.
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 thirty (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 30th day of June, 2008, as of June 11, 2008.
CORRECTED this _______day of July, 2008, as of June 11, 2008
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Patricia C. Beaver, Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
July 6, 2008