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 operation for the williams  fork and iles formations, parachute field, garfield county,      colorado

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cause no. 440

 

docket no. 170600393

 

TYPE: POOLING

 

order no. 440-83

CORRECTED

 

 

 

REPORT OF THE COMMISSION

The Commission heard this matter on June 12, 2017, at Rio Blanco County Courthouse, 555 Main St., Meeker, Colorado, upon application for an order to pool all interests in an approximate 640-acre drilling and spacing unit established for Section 8, Township 7 South, Range 95 West, 6th P.M., 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.

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 February 22, 2010, the Commission entered Order No. 440-59, which established an approximate 320-acre drilling and spacing unit for the S˝ of Section 8, Township 7 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations, and approved the equivalent of one well per ten acres, to be located anywhere in the unit but no closer than 100 feet from the boundaries of the unit without exception being granted by the Director of the Commission.  The Order stated that in cases where the lands abut or corner lands in respect of which the Commission has not at the time of drilling permit application granted the right to drill 10-acre density Williams Fork and Iles Formation wells, the well shall be located downhole no closer than 200 feet from the boundary or boundaries of the unit so abutting or cornering such lands without exception being granted by the Director of the Commission.

 

5.         On January 30, 2017, the Commission entered Order No. 440-77, which pooled all interests in the unit established for by Order No. 440-59 for the S˝ of Section 8, Township 7 South, Range 95 West, 6th P.M., and authorized cost recovery pursuant to §34-60-116(7), C.R.S. for the following wells: Monument Ridge B 24A-08-07-95 Well (API No. 05-045-22895), Monument Ridge B 23D-08-07-95 Well (API No. 05-045-22896), Monument Ridge B 33A-08-07-95 Well (API No. 05-045-22901), Monument Ridge B 33B-08-07-95 Well (API No. 05-045-22903), Monument Ridge B 33D-08-07-95 Well (API No. 05-045-22905), Monument Ridge B 33C-08-07-95 Well (API No. 05-045-22906), Monument Ridge B 24C-08-07-95 Well (API No. 05-045-22907), Monument Ridge B 24D-08-07-95 Well (API No. 05-045-22908), Monument Ridge B 34B-08-07-95 Well (API No. 05-045-22909), Monument Ridge B 24B-08-07-95 Well (API No. 05-045-22910), Monument Ridge B 34C-08-07-95 Well (API No. 05-045-22911), Monument Ridge B 34A-08-07-95 Well (API No. 05-045-22912), Monument Ridge B 43C-08-07-95 Well (API No. 05-045-22914), Monument Ridge B 43B-08-07-95 Well (API No. 05-045-22915), Monument Ridge B 44B-08-07-95 Well (API No. 05-045-22916), Monument Ridge B 44D-08-07-95 Well (API No. 05-045-22917), Monument Ridge B 34D-08-07-95 Well (API No. 05-045-22959), Monument Ridge B 43A-08-07-95 Well (API No. 05-045-22960), Monument Ridge B 44A-08-07-95 Well (API No. 05-045-22961), Monument Ridge B 23C-08-07-95 Well (API No. 05-045-22963), Monument Ridge B 44C-08-07-95 Well (API No. 05-045-22964), and Monument Ridge B 43D-08-07-95 Well (API No. 05-045-22965).

 

6.         On April 28, 2014, the Commission entered Order No. 440-70, which established an approximate 320-acre drilling and spacing unit for the N˝ of Section 8, Township 7 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons Williams Fork and Iles Formations, and authorized the equivalent of one well per ten acres, to be located anywhere in the unit but no closer than 100 feet from the boundaries of the unit, without exception being granted by the Director of the Commission.  The order stated that in cases where the lands abut or corner lands in respect of which the Commission has not at the time of drilling permit application granted the right to drill 10-acre density Williams Fork and Iles Formation wells, the well shall be located downhole no closer than 200 feet from the boundary or boundaries of the unit so abutting or cornering such lands, without exception being granted by the Director of the Commission.

 

7.         On January 30, 2017, the Commission entered Order No. 440-76, which pooled all interests in the drilling and spacing unit established by Order No. 440-70, and authorized cost recovery pursuant to C.R.S. 34-60-116(7) for the following wells: 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).

 

8.         Applicant drilled and completed the Monument Ridge B 32D-08-07-95 Well (API No. 05-045- 22902) (“Well”) close to the border between the unit that covers S˝ of Section 8, Township 7 South, Range 95 West, 6th P.M. (“Southern DSU”) and the unit that covers the N˝ of Section 8, Township 7 South, Range 95 West, 6th P.M. (“Northern DSU”).

 

8.         On April 13, 2017, Ursa, by the attorneys, filed with the Commission pursuant to §34-60-116, C.R.S., a verified application (“Application”) for an order to pool all interests in the proposed approximate 640-acre drilling and spacing unit 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) (“Well”):

 

Township 7 South, Range 95 West, 6th P.M.
Section 8:        All

9.            On April 13, 2017, Applicant filed a Concurrent Application for an order to establish an approximate 640-acre drilling and spacing unit for the Application Lands, and to approve the Monument Ridge B 32D-08-07-95 Well within the proposed unit.

10.          On May 22, 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. 

11.          Testimony and exhibits submitted in support of the Application by N. Arthur Bollen, Land Manager for Applicant, showed that all nonconsenting interest owners were notified of the Application and received an Authority for Expenditure ("AFE") and offer to participate in the Permitted Wells.  Further testimony concluded that the AFE sent by the Applicant to the interest owners was a fair and reasonable estimate of the costs of the proposed drilling operation and was received at least 35 days prior to the June 12, 2017 hearing date.

12.          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.

13.          Land testimony showed Applicant drilled and completed the Monument Ridge B 32D-08-07-95 Well (API No. 05-045- 22902) (“Well”) close to the border between the DSU that covers S˝ of Section 8, Township 7 South, Range 95 West, 6th P.M. (“Southern DSU”) and the DSU that covers the N˝ of Section 8, Township 7 South, Range 95 West, 6th P.M. (“Northern DSU”).

14.          Applicant further requests that the cost recovery provisions of §34-60-116(7), C.R.S., shall apply to the date the costs specified in §34-60-116(7)(b), C.R.S. were first incurred for the drilling of the Monument Ridge B 32D-08-07-95 Well.

15.          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.

16.          Applicant agreed to be bound by oral order of the Commission.

17.          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 640-acre drilling and spacing unit established for Section 8, Township 7 South, Range 95 West, 6th P.M., 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.

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 640-acre horizontal wellbore 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 date the costs specified in §34-60-116(7)(b), C.R.S. are first incurred for the drilling of the Monument Ridge B 32D-08-07-95 Well (API No. 05-045- 22902) (“Well”):

Township 7 South, Range 95 West, 6th P.M.
Section 8:        All

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 owners must reimburse the consenting working interest owners for their share of the costs and risks of drilling and operating the Well (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 as to the Well and shall therefore be deemed to be nonconsenting as to the Well and be subject to the penalties as provided for by §34-60-116(7), C.R.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 Well 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.            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 23rd day of June 2017, as of June 12, 2017.

CORRECTED this 27th day of September, 2014, as of June 12, 2017.

           

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By____________________________________

Julie Spence Prine, Secretary