BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE PROMULGATION AND ) CAUSE NO. 449
ESTABLISHMENT OF FIELD RULES TO GOVERN )
OPERATIONS IN THE ARAPAHOE FIELD, ) ORDER NO. 449-33
CHEYENNE COUNTY, COLORADO )
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission at 9:00 a.m. on September 22, 2008, in the Sabin-Cleere Conference Room, Building A, Colorado Department of Public Health and Environment, 4300 Cherry Creek Drive South, Denver, Colorado, for an order to allow an exception to the permitted location and to rescind the production restrictions under Order No. 449-14, for the Shirley Rother #1 Well located 693 feet FSL and 1538 feet FWL in the E½ SW¼ of Section 33, Township 14 South, Range 42 West, 6th P.M., for production of gas and associated hydrocarbons from the Morrow Formation.
FINDINGS
The Commission finds as follows:
1. Direct Petroleum Exploration, Inc (“Direct Petroleum”), 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 August 15, 1988, the Commission issued Order No. 449-14, which among other things, established 80-acre drilling and spacing units for certain lands including Section 33, Township 14 South, Range 42 West, 6th P.M. for production of gas and associated hydrocarbons from the Morrow Formation, with the permitted well to be located in the center of the NE¼ and the SW¼ of each quarter section with a tolerance of 200 feet in any direction.
5. On July 28, 2008, Direct Petroleum, by its attorney, filed with the Commission a verified application for an order seeking an exception location to Order No. 449-14, for the Shirley Rother #1 Well, which was drilled in the SE¼ SW¼ of Section 33, Township 14 South, Range 42 West, 6th P.M., such well being located 693 feet FSL and 1538 feet FWL for the production of gas and associated hydrocarbons from the Morrow Formation. This well was drilled under an Application for a Permit-to-Drill approved by the Colorado Oil and Gas Conservation Commission staff. Subsequent to the drilling of the well, Applicant was notified that an error had been made in approving this location due to inconsistent well location requirements under an existing order of the Commission and requested that Applicant file an exception location request.
The Shirley Rother #1 Well was completed as a producer from the Morrow Formation but is under production restrictions in accordance with Order No. 449-14. As a result of the high porosity and permeability of the Morrow Formation within which the Shirley Rother #1 Well was completed, this well is uneconomic to produce because of production restrictions. If production restrictions are rescinded, the well will be economic to produce. Applicant therefore requests that the production restrictions applicable under Order No. 449-14 be rescinded as they apply to the application lands and that the Shirley Rother #1 Well be approved as an exception location for the 80-acre drilling and spacing unit consisting of the E½ SW¼ of said Section 33.
6. On September 9, 2008, Direct Petroleum, 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.
7. Testimony and exhibits submitted in support of the application showed that on February 12, 1988, under Order No. 449-5, a production restriction was imposed on each well of 100 MCF per day per 80-acre drilling and spacing unit, for production from the Morrow Formation, which included the unit wherein the Shirley Rother #1 Well was recently drilled under the proposed exception location for the 80-acre drilling and spacing unit consisting of the E½ SW¼ of Section 33, Township 14 South, Range 42 West, 6th P.M. Additional testimony showed that on April 18, 1988, under Order No. 449-7, the previously imposed production restriction was continued for those lands associated with the Shirley Rother #1 Well. Further testimony showed that on September 19, 1988, under Order No. 449-20, a production restriction for lands in the vicinity of the unit wherein the Shirley Rother #1 Well is located, was modified to allow each Morrow Formation well to produce 100 MCF and/or 300 barrels of fluid (oil and/or water) per day. Testimony showed that on September 19, 1989, once the fields associated with the Morrow Formation production were defined under Order No. 449-25, the production restrictions for the Arapahoe Field were lifted, however, the lifting of those restrictions did not include lands in which the Shirley Rother #1 Well has been drilled.
8. Testimony and exhibits submitted in support of the application showed that the production in the Morrow Formation of the Arapahoe Field is from a major incised valley, and that the Morrow Formation found in the Shirley Rother #1 Well is not part of that incised valley. Additional testimony regarding cross-sectional analysis indicated that the Morrow Formation of the Arapahoe Field is deeper and stratigraphically separate from the productive sandstone attributed to the Morrow Formation found in the Shirley Rother #1 Well, and that numerous dry or non-commercial wells have been drilled between the defined Arapahoe Field and the Shirley Rother #1 Well. Further testimony indicated that gas found in the Shirley Rother #1 Well is from a separate sandstone from the productive sandstone of the Arapahoe Field, and that the Shirley Rother #1 Well is approximately 1.65 miles from the defined Arapahoe Field.
10. The above-referenced testimony and exhibits show that the proposed exception location and rescission of production restrictions will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas and associated hydrocarbons, and will not violate correlative rights.
11. Direct Petroleum Exploration, Inc. agreed to be bound by oral order of the Commission.
12. 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 allow an exception to the permitted location and to rescind the production restrictions under Order No. 449-14, for the Shirley Rother #1 Well located 693 feet FSL and 1538 feet FWL in the E½ SW¼ of Section 33, Township 14 South, Range 42 West, 6th P.M., for production of gas and associated hydrocarbons from the Morrow Formation.
ORDER
NOW, THEREFORE IT IS ORDERED, that an exception to the permitted location in Order No. 449-14 is hereby allowed for the Shirley Rother #1 Well, located at 693 feet FSL and 1538 feet FWL in the SE¼ SW¼ of Section 33, Township 14 South, Range 42 West, 6th P.M., for the production of gas and associated hydrocarbons from the Morrow Formation.
IT IS FURTHER ORDERED, that the production restrictions in Order No. 449-14 are hereby rescinded as to the Shirley Rother #1 Well, for production of gas and associated hydrocarbons from the Morrow Formation.
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, 2008, as of September 22, 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
September 23, 2008