BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

                IN THE MATTER OF THE PROMULGATION AND          )           CAUSE NO. 440

                ESTABLISHMENT OF FIELD RULES TO GOVERN      )

                OPERATIONS IN THE PARACHUTE FIELD,                   )           ORDER NO. 440-48

                GARFIELD COUNTY, COLORADO                                   )          

 

REPORT OF THE COMMISSION

 

This cause came on for hearing before the Commission at 9:00 a.m. on August 28, 2007, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to vacate the 320-acre drilling and spacing unit consisting of the E½ of Section 17, Township 7 South, Range 95 West, 6th P.M. and establish 40-acre drilling and spacing units for the E½ E½ of Section 17, Township 7 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.  EnCana Oil & Gas (USA) Inc. ("EnCana"), 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 April 20, 1990, the Commission issued Order No. 440-12, which among other things, established 320-acre drilling and spacing units for certain lands including Section 17, Township 7 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons from the Mesaverde Formation, with the permitted well to be located no closer than 600 feet from the boundaries of said unit and no closer than 1200 feet from any well producing or producible from the same formation.

 

5.  Rule 318.a. of the Commission Rules and Regulations requires that wells drilled in excess of two thousand five hundred (2500) feet in depth be located not less than six hundred (600) feet from any lease line, and located not less than one thousand two hundred (1200) feet from any other producible or drilling oil or gas well to the same common source of supply.  Section 17, Township 7 South, Range 95 West, 6th P.M. is subject to this Rule for the Iles Formation.

 

                        6.  On July 6, 2007, EnCana, filed with the Commission a verified application for an order to vacate the 320-acre drilling and spacing unit consisting of the E½ of Section 17, Township 7 South, Range 95 West, 6th P.M. and to establish 40-acre drilling and spacing units consisting of the E½ E½ of Section 17, Township 7 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.  In addition, the order should allow the equivalent of one well per 20 acres for both the Williams Fork and Iles Formations, with the permitted well to be located 200 feet from the boundaries of the drilling and spacing unit and 400 feet from any existing Williams Fork Formation or Iles Formation well absent an exception from the Commission. 

 

7.  On August 14, 2007, EnCana 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 EnCana is the majority leasehold owner in the application lands. 

 

9.  Testimony and exhibits submitted in support of the application showed that the Williams Fork and Iles Formations are members of the Mesaverde Group and are common sources of supply.  Additional testimony indicated that due to the heterogeneity of the formations, increased density is necessary to recover the reserves.

 

10.  Testimony and exhibits submitted in support of the application showed that the average estimated ultimate recovery (EUR) for a well drilled in lands surrounding the application lands is approximately 0.97 BCF for a Williams Fork Formation well.  Additional testimony and exhibits showed that the average drainage radius is between 17 acres and 22 acres for each well.

 

11.  Testimony and exhibits submitted in support of the application showed that well density of 20 acres in the application area will increase the EUR per section for the Williams Fork Formation.  Additional testimony indicated that one well per 20 acres versus one well per 40 acres provides an increased recovery factor of gas in place from 33% to 53%, with an incremental recovery of 18.0 BCF.

 

12.  Testimony and exhibits submitted in support of the application showed that the Iles Formation reservoir model results in production of approximately 0.35 BCF from the Iles Formation during the first 10 years of production.  Additional testimony indicated that while the Iles Formation is not economic as a stand alone horizon, it is clearly economic as an add-on to the Williams Fork Formation development.

 

                        13.  Testimony and exhibits submitted in support of the application showed that there is less original gas in place (OGIP) for the Iles Formation than for the Williams Fork Formation, averaging between 25 to 35 BCF per section.

 

                        14.  Testimony and exhibits submitted in support of the application showed that the OGIP for the application lands is between 90 and 100 BCF per section for the Williams Fork Formation, and that these lands require increased well density to satisfactorily drain the Williams Fork Formation on an economic and efficient basis.

 

                        15.  Testimony and exhibits submitted in support of the application showed that based on core data obtained in the Federal 20-10 Well, the Williams Fork Formation has an average porosity of 9.4% and an average permeability of 0.039 md.  Additional testimony indicated that based on core data obtained in the Superior #1 Well, the Cozzette member of the Iles Formation has an average porosity of 6.0% and an average permeability of 0.009 md. 

 

16.  The above-referenced testimony and exhibits show that the proposed spacing and density, will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas, and will not violate correlative rights.

 

17.  EnCana Oil & Gas (USA) Inc. agreed to be bound by oral order of the Commission.

 

18.  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 320-acre drilling and spacing unit consisting of the E½ of Section 17, Township 7 South, Range 95 West, 6th P.M. and establish 40-acre drilling and spacing units for the E½ E½ of Section 17, Township 7 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.

 

ORDER

 

NOW, THEREFORE, IT IS ORDERED, that the 320-acre drilling and spacing unit consisting of the E½ of Section 17, Township 7 South, Range 95 West, 6th P.M. is hereby vacated and 40-acre drilling and spacing units are hereby established for the E½ E½ of Section 17, Township 7 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.

 

IT IS FURTHER ORDERED, that the equivalent of one well per 20 acres is hereby approved for the Williams Fork and the Iles Formations, with the permitted well to be located 200 feet from the boundaries of the drilling and spacing unit and 400 feet from any existing Williams Fork Formation or Iles Formation well absent an exception from the Commission. 

 

IT IS FURTHER ORDERED, that wells to be drilled under this application shall be drilled from the surface either vertically or directionally from no more than one well pad located on a given quarter quarter section unless exception is granted by the Director of the Colorado Oil and Gas Conservation Commission.

 

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 ______ day of September, 2007, as of August 28, 2007.

 

                                                                                    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

September 10, 2007