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 WILLIAMS FORK AND ILES FORMATIONS, PARACHUTE FIELD, GARFIELD COUNTY, COLORADO

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CAUSE NO. 440

 

DOCKET NO. 170100031

 

TYPE: POOLING

 

ORDER NO. 440-76

 

REPORT OF THE COMMISSION

 

The Commission heard this matter on January 30, 2017, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to pool all interests within an approximate 320-acre drilling and spacing unit established for Section 8, Township 7 South, Range 95 West, 6th P.M., and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Monument Ridge B 32D-08-07-95 Well, Monument Ridge B 42D-08-07-95 Well, Tompkins 31A-08-07-95 Well, Tompkins 32C-08-07-95 Well, Tompkins 42B-08-07-95 Well, Tompkins 42C-08-07-95 Well, Tompkins 32B-08-07-95 Well, Tompkins 41D-08-07-95 Well, Tompkins 32A-08-07-95 Well, Tompkins 42A-08-07-95 Well, Tompkins 31C-08-07-95 Well, Tompkins 41A-08-07-95 Well, Tompkins 41C-08-07-95 Well, Tompkins 41B-08-07-95 Well, Tompkins 31D-08-07-95 Well, Tompkins 31B-08-07-95 Well, Tompkins 41AWI-08-07-95 Well, Tompkins 21B-08-07-95 Well, Tompkins 21C-08-07-95 Well, and Tompkins 21A-08-07-95 Well, for the development and operation of the Williams Fork and Iles Formations.

 

 

FINDINGS

 

The Commission finds as follows:

 

1.         Ursa Operating Company LLC (Operator No. 10447) (“Ursa” 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 jurisdiction to promulgate the hereinafter prescribed order pursuant to the Oil and Gas Conservation Act.

 

4.         On April 19, 1990, the Commission issued Order No. 440-12 which, among other things, established 320-acre drilling and spacing units for certain lands, including Section 8, Township 7 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons from the Mesaverde Formation, with the designation as either E˝ and W˝ standup DSUs or N˝ and S˝ laydown drilling and spacing units at the discretion of the operator of the first well permitted, with the permitted well to be located on the established drilling and spacing unit no closer than 600 feet from the drilling and spacing unit boundaries and no closer than 1,200 feet from any well producing or producible from the same Mesaverde Formation.

 

5.         On February 22, 2010, the Commission entered Order No. 440-59 which, among other things, established an approximate 320-acre laydown drilling and spacing unit for the S˝ of Section 8, Township 7 South, Range 95 West, 6th P.M., and approved the equivalent of one well per 10 acres well density, for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.

 

6.         On April 16, 2012, the Commission entered Order No. 440-70, which established the approximate 320-acre laydown drilling and spacing units for the N˝ of Section 8, Township 7 South, Range 95 West, 6th P.M., and approved 10-acre bottomhole density within the drilling and spacing unit, for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations of the Mesaverde Group. Order No. 440-70 required that all wells drilled to the Williams Fork and Iles Formations in the drilling and spacing unit must be located downhole no closer than 100 feet from the drilling and spacing units boundaries, unless such boundary abuts or corners lands for which the Commission has not at the time of the well permit application granted the right to drill 10-acre density wells, in which event the wells must be located downhole no closer than 200 feet to such abutting or cornering lands, without exception being granted by the Director.

 

7.         On December 1, 2016, Ursa, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to pool all interests in an approximate 320-acre drilling and spacing unit established for the below-described lands (“Application Lands”), for the development and operation of the Williams Fork and Iles Formations, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Monument Ridge B 32D-08-07-95 Well (API No. 05-045-22902), Monument Ridge B 42D-08-07-95 Well (API No. 05-045-22913), Tompkins 31A-08-07-95 Well (API No. 05-045-22471), Tompkins 32C-08-07-95 Well (API No. 05-045-22472), Tompkins 42B-08-07-95 Well (API No. 05-045-22473), Tompkins 42C-08-07-95 Well (API No. 05-045-22474), Tompkins 32B-08-07-95 Well (API No. 05-045-22475), Tompkins 41D-08-07-95 Well (API No. 05-045-22476), Tompkins 32A-08-07-95 Well (API No. 05-045-22477), Tompkins 42A-08-07-95 Well (API No. 05-045-22478), Tompkins 31C-08-07-95 Well (API No. 05-045-22479), Tompkins 41A-08-07-95 Well (API No. 05-045-22480), Tompkins 41C-08-07-95 Well (API No. 05-045-22481), Tompkins 41B-08-07-95 Well (API No. 05-045-22482), Tompkins 31D-08-07-95 Well (API No. 05-045-22483), Tompkins 31B-08-07-95 Well (API No. 05-045-22484), Tompkins 41AWI-08-07-95 Well (API No. 05-045-22551), Tompkins 21B-08-07-95 Well (API No. 05-045-22821), Tompkins 21C-08-07-95 Well (API No. 05-045-22822), and Tompkins 21A-08-07-95 Well (API No. 05-045-22823) (“Wells”):

 

Township 7 South, Range 95 West, 6th P.M.

Section 8:        N˝

 

8.         The Application also requested: 1) that if any owner who receives the materials required by Rule 530 for future wells to be drilled pursuant to Order No. 440-73 does not elect in writing to lease or participate in such well within 35 days of receiving the Rule 530 materials, then such owner shall be deemed nonconsenting as to the proposed well and subject to the cost recovery provisions of §34-60-116(7), C.R.S., but only if the proposed well is commenced no later than six months after the expiration of the 35-day notice period and completed with due diligence; 2) that such six month period may be extended as to one or more owners by written waiver from such owner or owners, and may be extended as to all owners for reasons of force majeure by written notice by the operator to the other parties for reasons of force majeure; 3) that among other commonly accepted occurrences of force majeure, the following be considered force majeure for purposes of the Application: any federal, state or local government action, inaction, or regulatory delay that prevents Applicant from commencing and/or completing a well with due diligence; 4) that if a proposed well is not commenced on or before the date that is six months after expiration of the thirty-five day notice period (including any extension thereof) and completed with due diligence, then written notice proposing such well must be resubmitted to all parties in accordance with Commission Rule 530 as if no prior proposal had been made, and the parties shall have a new 35-day period within which to lease or consent to participate in such well; and 5) that no further certification or application need be submitted to or approved by the Commission to impose the cost recovery provisions of §34-60-116(7), C.R.S. as to any nonconsenting owners for any of future wells.

 

9.         On January 9, 2017, Applicant, by its attorneys, 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.

 

10.       Land testimony and exhibits submitted in support of the Application by N. Arthur Bollen, Land Manager for Ursa, showed that all nonconsenting interest owners were notified of the Application and received Authority for Expenditures ("AFEs") and offers to participate in the Well. Further testimony concluded that the AFEs sent by the Applicant to the interest owners were fair and reasonable estimates of the costs of the proposed drilling operations and were received at least 35 days prior to the January 30, 2017 hearing date.

                                                 

11.       Land testimony showed the Applicant complied with the requirements of Rule 530., and is entitled to the cost recovery provisions pursuant to §34-60-116(7), C.R.S., for the Monument Ridge B 32D-08-07-95 Well, Monument Ridge B 42D-08-07-95 Well, Tompkins 31A-08-07-95 Well, Tompkins 32C-08-07-95 Well, Tompkins 42B-08-07-95 Well, Tompkins 42C-08-07-95 Well, Tompkins 32B-08-07-95 Well, Tompkins 41D-08-07-95 Well, Tompkins 32A-08-07-95 Well, Tompkins 42A-08-07-95 Well, Tompkins 31C-08-07-95 Well, Tompkins 41A-08-07-95 Well, Tompkins 41C-08-07-95 Well, Tompkins 41B-08-07-95 Well, Tompkins 31D-08-07-95 Well, Tompkins 31B-08-07-95 Well, Tompkins 41AWI-08-07-95 Well, Tompkins 21B-08-07-95 Well, Tompkins 21C-08-07-95 Well, and Tompkins 21A-08-07-95 Well, but did not provide testimony for any subsequent wells.

 

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

 

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

 

14.       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., the Commission should enter an order to pool all interests in an approximate 320-acre drilling and spacing unit established for Section 8, Township 7 South, Range 95 West, 6th P.M., and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Monument Ridge B 32D-08-07-95 Well, Monument Ridge B 42D-08-07-95 Well, Tompkins 31A-08-07-95 Well, Tompkins 32C-08-07-95 Well, Tompkins 42B-08-07-95 Well, Tompkins 42C-08-07-95 Well, Tompkins 32B-08-07-95 Well, Tompkins 41D-08-07-95 Well, Tompkins 32A-08-07-95 Well, Tompkins 42A-08-07-95 Well, Tompkins 31C-08-07-95 Well, Tompkins 41A-08-07-95 Well, Tompkins 41C-08-07-95 Well, Tompkins 41B-08-07-95 Well, Tompkins 31D-08-07-95 Well, Tompkins 31B-08-07-95 Well, Tompkins 41AWI-08-07-95 Well, Tompkins 21B-08-07-95 Well, Tompkins 21C-08-07-95 Well, and Tompkins 21A-08-07-95 Well, for the development and operation of the Williams Fork and Iles Formations.

 

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.         Pursuant to the provisions of §34-60-116, C.R.S., as amended, of the Oil and Gas Conservation Act, all interests in an approximate 320-acre drilling and spacing unit established for the below-described lands are hereby pooled, for the development and operation of the Williams Fork and Iles Formations, effective as of the earlier of the date of the Application, or the date that any of the costs specified in §34-60-116(7)(b)(II), C.R.S., are first incurred for the drilling of the Monument Ridge B 32D-08-07-95 Well (API No. 05-045-22902), Monument Ridge B 42D-08-07-95 Well (API No. 05-045-22913), Tompkins 31A-08-07-95 Well (API No. 05-045-22471), Tompkins 32C-08-07-95 Well (API No. 05-045-22472), Tompkins 42B-08-07-95 Well (API No. 05-045-22473), Tompkins 42C-08-07-95 Well (API No. 05-045-22474), Tompkins 32B-08-07-95 Well (API No. 05-045-22475), Tompkins 41D-08-07-95 Well (API No. 05-045-22476), Tompkins 32A-08-07-95 Well (API No. 05-045-22477), Tompkins 42A-08-07-95 Well (API No. 05-045-22478), Tompkins 31C-08-07-95 Well (API No. 05-045-22479), Tompkins 41A-08-07-95 Well (API No. 05-045-22480), Tompkins 41C-08-07-95 Well (API No. 05-045-22481), Tompkins 41B-08-07-95 Well (API No. 05-045-22482), Tompkins 31D-08-07-95 Well (API No. 05-045-22483), Tompkins 31B-08-07-95 Well (API No. 05-045-22484), Tompkins 41AWI-08-07-95 Well (API No. 05-045-22551), Tompkins 21B-08-07-95 Well (API No. 05-045-22821), Tompkins 21C-08-07-95 Well (API No. 05-045-22822), and Tompkins 21A-08-07-95 Well (API No. 05-045-22823):

 

Township 7 South, Range 95 West, 6th P.M.

Section 8:        N˝

 

2.         The production obtained from the drilling and spacing unit shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within the drilling and spacing unit; each owner of an interest in the drilling and spacing unit shall be entitled to receive its share of the production of the Well located on the drilling and spacing unit applicable to its interest in the drilling and spacing unit.

 

3.         The nonconsenting working interest owners must reimburse the consenting working interest owners for their share of the costs and risks of drilling and operating each of the Wells (including penalties as provided by §34-60-116(7)(b), C.R.S.) out of production from the drilling and spacing unit representing the cost-bearing interests of the nonconsenting working interest owners as provided by §34-60-116(7)(a), C.R.S.

 

4.         Any unleased owners are hereby deemed to have elected not to participate and shall therefore be deemed to be nonconsenting as to the Wells and be subject to the penalties as provided for by §34-60-116(7), C.R.S.  Any party seeking the cost recovery provisions of §34-60-116(7), C.R.S., shall first comply with paragraph 7, below, for any subsequent well(s).

 

5.         Each nonconsenting unleased owner within the drilling and spacing unit shall be treated as the owner of the landowner's royalty to the extent of 12.5% of its record title interest, whatever that interest may be, until such time as the consenting owners recover, only out of each nonconsenting owner's proportionate 87.5% share of production, the costs specified in §34-60-116(7)(b), C.R.S., as amended.  After recovery of such costs, each unleased nonconsenting mineral owner shall then own its proportionate 8/8ths share of the well, surface facilities and production, and then be liable for its proportionate share of further costs incurred in connection with the well as if it had originally agreed to the drilling.

 

6.         The operator of the Wells drilled on the above-described drilling and spacing unit shall furnish the nonconsenting owners with a monthly statement of all costs incurred, together with the quantity of oil and gas produced, and the amount of proceeds realized from the sale of production during the preceding month.

 

7.         In order for Applicant to obtain cost recovery under Section 34-60-116(7), C.R.S., for any other Williams Fork or Iles Formation well authorized under Commission Order No. 440-70 for the Application Lands, Applicant will file a notarized certification to the Commission in this Docket Number that it has complied with Rule 530 for any such well and that the proposed well was spudded no later than one-hundred eighty days after the expiration of the 35-day notice period and will be completed with due diligence.  The certification must identify all parties that received the Rule 530 information for the well, include a copy of the Rule 530 information provided, identify the parties to which cost recovery applies, be filed within 10 days after the later of spudding the well or the expiration of the 35-day notice period, and certify that a copy of the notarized certification was served, by sending it first class U.S. Mail, on all non-consenting parties for which Applicant seeks cost recovery.  If a proposed well is not spudded prior to or within one-hundred eighty days after expiration of the thirty-five (35) day notice period and completed with due diligence, then Applicant will resubmit the written notice proposing such well to all parties in accordance with Rule 530 as if no prior proposal had been made, and the parties shall have a new 35-day period within which to lease or elect to participate in such well.

 

8.         Nothing in this order is intended to conflict with §34-60-116, C.R.S., as amended.  Any conflict that may arise shall be resolved in favor of the statute.

 

 

IT IS FURTHER ORDERED:

 

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

 

2.         The Commission expressly 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 Procedure 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 February, 2017, as of January 30, 2017.

           

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

By____________________________________

Julie Murphy, Secretary