BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE PROMULGATION AND ) CAUSE NO. 510
ESTABLISHMENT OF FIELD RULES TO GOVERN )
OPERATIONS IN THE RULISON FIELD, ) ORDER NO. 510-11
GARFIELD COUNTY, COLORADO )
This cause came on for hearing before the Commission at 9:00 a.m. on July 12, 2004 in Suite 801, 1120 Lincoln Street, Denver, Colorado on the amended application of Petroleum Development Corporation, for an order to increase the number of wells which can be optionally drilled into and produced from the Williams Fork Formation of the lands described below (“Application Lands”) which constitute existing drilling units (or portions thereof) to the equivalent of one (1) Williams Fork Formation well per ten (10) acres, with all future Williams Fork Formation wells to be located downhole anywhere in the drilling and spacing unit but no closer than 100 feet from the boundaries of the unit without exception being granted by the Director. In cases where the Application Lands abut or corner lands where the Commission has not at the time of drilling permit application granted the right to drill 10 acre density Williams Fork Formation wells, the well should be located downhole no closer than 200 feet from the boundary or boundaries of the drilling unit so abutting or cornering such lands without exception being granted by the Director. As to those Application Lands which are unspaced, all future Williams Fork Formation wells should be located downhole anywhere upon the Application Lands but no closer than 100 feet from the boundaries of any lease line unless such lease line abuts or corners lands where the Commission has not at the time of drilling permit application granted the right to drill 10 acre density wells in which event the wells should be drilled downhole no closer than 200 feet from the lease line which so abuts or corners the lands where 10 acre density downhole drilling for Williams Fork Formation wells has not been ordered by the Commission. It is not intended that more than four (4) Williams Fork Formation wells would be drilled downhole in the Application Lands per governmental quarter quarter section. It is intended that Williams Fork wells to be drilled in the Application Lands will 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.
FINDINGS
The Commission finds as follows:
1. Petroleum Development Corporation (“PDC”), 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.
4. On June 9, 1994, the Commission issued Order No. 510-1, which amended Rule 316 (now Rule 318) to establish new setback rules for production of gas and associated hydrocarbons from the Williams Fork Formation for the below-described lands, with the permitted wells to be located no closer than 400 feet from the boundaries of any lease line and no closer than 800 feet from any existing Williams Fork Formation well or wells:
Township 6 South, Range 96 West, 6th P.M.
Section 8: All
Section 13: All
Section 17: All
Sections 19 through 22: All
Sections 28 through 33: All
Township 6 South, Range 97 West, 6th P.M.
Section 14: All
Sections 23 through 27: All
Sections 35 and 36: All
Township 7 South, Range 96 West, 6th P.M.
Sections 2 through 11: All
Sections 14 through 23: All
Sections 26 through 35: All
Township 7 South, Range 97 West, 6th P.M.
Sections 1 and 2: All
Sections 11 through 14: All
5. On November 29, 2000, the Commission issued Order No. 510-4, which established 40-acre drilling and spacing units for the below-described lands which were previously unspaced, and authorized the number of wells which can be drilled into and produced from the Williams Fork Formation as the equivalent of one (1) well per 20 acres, with the permitted well to be located no closer than 200 feet from the boundaries of a drilling unit and no closer than 400 feet from any existing Williams Fork Formation well or wells:
Township 6 South, Range 96 West, 6th P.M.
Section 17: E½, E½ W½
Section 20: N½, SE¼, E½ SW¼
Section 28: S½ NW¼, N½ SW¼,
Section 29: NE¼, NE¼ NW¼, NE¼ SE¼
Section 31: S½ NE¼, N½ SE¼
Section 32: SW¼ NW¼, N½ SW¼, NW¼ SE¼
6. Rule 318.a. of the Rules and Regulations of the Colorado Oil and Gas Conservation Commission requires wells drilled in excess of 2,500 feet in depth to be located not less than 600 feet from any lease line, and not less than 1,200 feet from any other producible or drilling oil or gas well when drilling to the same common source of supply. The below-listed lands are under the provisions of Rule 318.a.:
Township 6 South, Range 96 West, 6th P.M.
Section 4: That portion of the section west of Parachute Creek
Section 5 through 7: All
Section 18: All
Township 6 South, Range 97 West, 6th P.M.
Section 12: All
Section 13: All
7. On May 24, 2004, Petroleum Development Corporation (“PDC”), by its attorney, filed with the Commission a verified Application for an order to increase the number of wells which can be optionally drilled into and produced from the Williams Fork Formation to the equivalent of one (1) well per 10 acres, with all future wells to be located downhole anywhere in the drilling and spacing unit but no closer than 100 feet from the boundaries of the unit without exception being granted by the Director for the below-listed lands:
Township 6 South, Range 96 West, 6th P.M.
Section 4: That portion of the section west of Parachute Creek
Sections 5 through 7: All
Section 8: NW¼, E½ NE¼
Section 17: W½ W½, E½ W½
Section 18: All
Section 19: SW¼
Section 30: S½
Section 31: W½
Township 6 South, Range 97 West, 6th P.M.
Sections 12 and 13: All
Township 7 South, Range 96 West, 6th P.M.
Section 5: W½, NE¼
Section 6: S½, NE¼
Section 7: N½, SE¼
Section 17: NW¼
Section 18: N½
Township 7 North, Range 97 West, 6th P.M.
Section 1: W½
Section 12: NE¼
In addition, in cases where the above-described lands abut or corner lands where the Commission has not at the time of drilling permit application granted the right to drill 10-acre density wells, the well should be located downhole no closer than 200 feet from the boundary or boundaries of the drilling unit so abutting or cornering such lands without exception being granted by the Director.
8. At the time of the prehearing conference, Mr. Keefe amended the application to remove the W½ of Section 1 and the NE¼ of Section 12, Township 7 North, Range 97 West, 6th P.M., as these lands were improperly noticed.
9. Testimony and exhibits presented at the administrative hearing showed a map of the proposed ten (10) acre density application lands in the Grand Valley Field in Garfield County. The application lands for the proposed ten (10) acre density areas were outlined on the map. Additional testimony indicated that PDC owns a leasehold interest in the application lands. The map also showed lands which had been previously approved for ten (10) acre density that are adjacent to the PDC application lands to the east. Further testimony and exhibits demonstrated the steep, rugged topography of the application lands.
10. Testimony and exhibits presented at the administrative hearing described the basin-centered natural gas deposits in the Piceance Basin in the area of the application lands, along with a description of the Williams Fork Formation which is the subject of the application. Additional testimony indicated that the Williams Fork Formation consists of sandstones, shales, mudstones and coals which were deposited in a non-marine, meandering stream environment. The lower portion of the formation consists of a continuously gas saturated interval. The sands that are completed for gas production are in the gas saturated interval. Further testimony indicated that the sand bodies in the Williams Fork Formation are highly discontinuous, with very limited lateral extent and very low permeability.
11. Testimony and exhibits presented at the administrative hearing showed the many vertically stacked fluvial, meander belt point bar sand bodies present in the Williams Fork Formation in the application area. Additional testimony and exhibits showed that many of the discontinuous and compartmentalized meander belt point bar sand bodies are not correlatable between existing wells with setbacks as close as five hundred eighty-four (584) feet, which is less than the ideal ten (10) acre density setback of six hundred sixty (660) feet. Further testimony indicated that wells drilled under setbacks equivalent to ten (10) acre density would intersect very few, if any, of the same sand bodies, and that only gas from the sand bodies that are intersected by a well is produced into the well.
12. Testimony and exhibits presented at the administrative hearing showed that Rifle Gap is approximately twenty (20) miles east of the application lands. Exhibits showed that wells drilled as close as six hundred sixty (660) feet, which is equivalent to ten (10) acre density, would not penetrate the same sand bodies, even though they would appear to correlate on cross sections created from logs from two wells. Additional testimony indicated that measurements have been made by Dr. Rex Cole from Mesa State College of the Williams Fork Formation sand body sizes at the Mesaverde Group Outcrop in Coal Canyon near Cameo, Colorado. Further testimony indicated that the sand bodies had widths that ranged from forty (40) feet to two thousand seven hundred and ninety one (2,791) feet, with an average lateral extent of the one hundred thirty-six (136) sand bodies that were measured of approximately five hundred and twenty-six (526) feet. One third (1/3) of the sand bodies had widths of less than two hundred and fifty (250) feet, and seventy seven percent (77%) of the sand bodies had widths of less than seven hundred and fifty (750) feet. Additional testimony indicated that if wells were drilled with a spacing of greater than two hundred and fifty (250) feet that one third (1/3) of the sand bodies would not be intersected, and that if wells were drilled with a spacing of greater than five hundred (500) feet that two thirds (2/3) of the sand bodies would not be intersected. This is very consistent with a theoretical ten (10) acre density lateral extent of six hundred sixty (660) feet.
13. Testimony and exhibits presented at the administrative hearing showed a table of estimated recoverable gas in place per ten (10) acres for twenty (20) wells in the application lands area based on well log parameters including net pay, average porosity, average water saturation, and depth. The calculations assumed a recovery factor of eighty percent (80%) The average estimated recoverable gas in place per ten (10) acres is 1.107 Billion Cubic Feet (BCF). Additional testimony indicated that this equates to 88.6 BCF of gas in place per six hundred forty (640) acres. Further testimony and exhibits showed show a table of estimated ultimate gas recovery based on decline curve analysis for fifty-five (55) wells that have been drilled in the application lands area. The average estimated ultimate gas recovery for the wells was .920 BCF.
14. Testimony and exhibits presented at the administrative hearing showed a reserve summary and a calculation of incremental gas which could be recovered with ten (10) acre density wells in the application lands. The exhibit included a summary of gas in place estimates per six hundred forty (640) acres from a number of different studies, including studies performed by the United States Geological Survey, the Multiwell Experiment in Rulison, the Gas Research Institute, and Barrett Resources. Additional testimony indicated that the PDC calculated gas in place of 88.6 BCF per six hundred forty (640) acres is within the range of the various estimates, which ranged from seventy (70) to one hundred seventy (170) BCF per six hundred forty (640) acres. Exhibits also showed that the estimated area drained per well is eight and three tenths (8.3) acres per well, and that the estimated incremental gas produced by three (3) additional wells per forty (40) acres is 2. BCF. Further testimony indicated that the recovery factor for one well per forty (40) acres is sixteen and seven tenths percent (16.7%), and that the recovery factor for one well per ten (10) acres is sixty six and eight tenths percent (66.8%).
15. Testimony and exhibits presented at the administrative hearing showed an economic calculation for a new Williams Fork Formation well located on ten (10) acre density in the application lands. Additional testimony indicated that drilling ten (10) acre density wells in the application area will yield an economic rate of return acceptable to PDC, with a payout of two and six tenths to one (2.6:1) and a rate of return of twenty percent (20%).
16. The above-referenced testimony and exhibits show that the proposed density will allow more efficient drainage, will prevent waste, will not violate correlative rights and will assure a greater ultimate recovery of gas and associated hydrocarbons.
17. No protests to the application have been filed with the Commission or the Applicant.
18. PDC commits that Williams Fork Formation wells to be drilled in the Application Lands will 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.
19. PDC agrees to be bound by oral order of the Commission.
20. Based on the facts stated in the verified application, having received no protests and having been heard by the Hearing Officer who recommends approval, the Commission should enter an order to allow additional wells to be drilled for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group, the equivalent of one (1) well per 10 acres for the application lands described above in Finding No. 7, except for the W½ of Section 1 and the NE¼ of Section 12, Township 7 North, Range 97 West, 6th P.M., which were removed from the Application as these lands were improperly noticed. The order should allow the permitted downhole location for each new Williams Fork Formation well drilled upon the application lands to be located downhole anywhere in the drilling and spacing unit but no closer than 100 feet from the boundaries of the unit without exception being granted by the Director. For lands that the Commission has not at the time of the drilling permit application granted the right to drill 10 acre density, the well should be located downhole no closer than 200 feet from the boundary or boundaries of the drilling unit so abutting or cornering such lands without exception being granted by the Director. In addition, the order should allow the permitted downhole location for each new Williams Fork Formation well drilled upon application lands which are unspaced to be located anywhere upon the Application Lands but no closer than 100 feet from the boundaries of any lease line unless such lease line abuts or corners lands in respect of which the Commission has not at the time of a drilling application granted the right to drill 10 acre density wells in which event the wells should be drilled downhole no closer than 200 feet from the lease line which so abuts or corners the lands in respect of which 10 acre density downhole drilling for Williams Fork Formation wells has not been ordered by the Commission. Further, the order should allow wells drilled in the application lands within a given quarter-quarter section to be drilled from the surface either vertically or directionally from one pad located on that quarter-quarter section.
ORDER
NOW, THEREFORE, IT IS ORDERED, that additional wells are hereby allowed to be drilled for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group, the equivalent of one (1) well per 10 acres for the Application Lands described below:
Township 6 South, Range 96 West, 6th P.M.
Section 4: That portion of the section west of Parachute Creek
Sections 5 through 7: All
Section 8: NW¼, E½ NE¼
Section 17: W½ W½, E½ W½
Section 18: All
Section 19: SW¼
Section 30: S½
Section 31: W½
Township 6 South, Range 97 West, 6th P.M.
Sections 12 and 13: All
Township 7 South, Range 96 West, 6th P.M.
Section 5: W½, NE¼
Section 6: S½, NE¼
Section 7: N½, SE¼
Section 17: NW¼
Section 18: N½
IT IS FURTHER ORDERED, that the permitted downhole location for each new Williams Fork Formation well drilled upon the application lands shall be located downhole anywhere in the drilling and spacing unit but no closer than 100 feet from the boundaries of the unit without exception being granted by the Director. For lands that the Commission has not at the time of the drilling permit application granted the right to drill 10 acre density, the well shall be located downhole no closer than 200 feet from the boundary or boundaries of the drilling unit so abutting or cornering such lands without exception being granted by the Director.
IT IS FURTHER ORDERED, that the permitted downhole location for each new Williams Fork Formation well drilled upon the Application Lands which are unspaced shall be located anywhere upon the Application Lands but no closer than 100 feet from the boundaries of any lease line unless such lease line abuts or corners lands in respect of which the Commission has not at the time of a drilling application granted the right to drill 10 acre density wells in which event the wells shall be drilled downhole no closer than 200 feet from the lease line which so abuts or corners the lands in respect of which 10 acre density downhole drilling for Williams Fork Formation wells has not been ordered by the Commission.
IT IS FURTHER ORDERED, that wells drilled in the application lands within a given quarter-quarter section shall be drilled from the surface either vertically or directionally from one pad located on that quarter-quarter section.
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 July 2004, as of July 12, 2004.
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
July 27, 2004