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. 440-50

GARFIELD COUNTY, COLORADO                                   )          

 

REPORT OF THE COMMISSION

 

This cause came on for hearing before the Commission at 9:00 a.m. on November 5, 2007, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to establish a 320-acre drilling and spacing unit for the E½ of Section 15, Township 7 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons from the Iles Formation, and to 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.

 

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 15, 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 2500 feet in depth be located not less than 600 feet from any lease line, and located not less than 1200 feet from any other producible or drilling oil or gas well to the same common source of supply.  Section 15, Township 7 South, Range 95 West, 6th P.M. is subject to this Rule for the Iles Formation. 

 

6.  On September 14, 2007, EnCana, by its attorneys, filed with the Commission a verified application for an order to establish a 320-acre drilling and spacing unit for the E½ of Section 15, Township 7 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons from the Iles Formation, and 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 October 23, 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 indicated that the mineral and surface ownership of the application lands is both fee and federal, and that EnCana is the majority leasehold owner of the application lands. 

 

9.  Testimony and exhibits submitted in support of the application showed that the original gas-in-place for the Iles Formation is estimated to average between 20 and 25 BCF per section, and that the original gas-in-place for the Williams Fork Formation is estimated to average between 75 and 80 BCF per section.  Additional testimony and exhibits from nearby core data indicated that the Cozzette member of the Iles Formation has an average porosity of 6.0% and an average permeability of 0.009 md., and that the Williams Fork Formation has an average porosity of 9.4% and an average permeability of 0.039 md.

 

10.  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, but due to the heterogeneity of the formations increased well density is necessary to recover the reserves. 

 

11.  Testimony and exhibits submitted in support of the application showed that the average estimated ultimate recovery in the most mature area of South Parachute for the Williams Fork Formation is approximately 0.98 BCF per well, and that the average drainage radius is between 17 acres and 22 acres per well. 

 

12.  Testimony and exhibits submitted in support of the application showed that 20-acre well density versus 40-acre well density in the application area will increase the recovery factor of gas-in-place from the Williams Fork Formation from 33% to 53%, with an incremental recovery of 16.0 BCF.

 

13.  Additional testimony and exhibits showed that the average estimated ultimate recovery for the Iles Formation is approximately 0.35 BCF per well.  Testimony indicated that while the Iles Formation is not economic as a stand alone horizon, it is clearly economic as an add-on to Williams Fork Formation development.

 

14.  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.

 

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

 

16.  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 establish a 320-acre drilling and spacing unit for the E½ of Section 15, Township 7 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons from the Iles Formation, and 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. 

 

ORDER

 

NOW, THEREFORE, IT IS ORDERED, that a 320-acre drilling and spacing unit is hereby established for the E½ of Section 15, Township 7 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons from the Iles Formation.

 

IT IS FURTHER ORDERED, that the equivalent of one well per 20 acres is hereby approved 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. 

 

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 pad located on a given quarter quarter section unless exception is granted by the Director of the Colorado Oil and Gas Conservation Commission, and that both the Williams Fork and Iles Formations shall be reached from a single wellbore.

 

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 November, 2007, as of November 5, 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

November 9, 2007