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 MAMM CREEK FIELD, ) ORDER NO. 510-18
GARFIELD COUNTY, COLORADO ) CORRECTED
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission at 9:00 a.m. on January 9, 2006, Suite 801, in The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to establish 320-acre drilling and spacing units for certain lands in Townships 5 and 6 South, Ranges 96 and 97 West, 6th P.M., for production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group, and to increase the number of wells which can be optionally drilled into and produced from the Williams Fork Formation of the application lands to the equivalent of one well per 10 acres.
FINDINGS
The Commission finds as follows:
1. Piceance Gas Resources, LLC ("Piceance") and Petroleum Development Corporation ("PDC") as applicants herein, are interested parties 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 July 12, 2004, the Commission issued Order No. 510-11, which provided for optional drilling of Williams Fork Formation of the Mesaverde Group wells equivalent to one per 10 acres with the permitted wells to be located anywhere within the drilling and spacing unit but no closer than 100 feet from the boundaries of the unit without exception being granted by the Director, except that with respect to units abutting or cornering lands for which the Commission has not at the time of the drilling permit application granted the right to drill 10-acre density wells, 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 land, including the below-listed lands:
Township 6 South, Range 96 West, 6th P.M.
Section 5: All
Section 6: All
Section 18: All
5. On March 22, 2005, the Commission issued Order No. 510-13, which provided for optional drilling of Williams Fork Formation of the Mesaverde Group wells equivalent to one per 10 acres, with the permitted wells to be located anywhere within the lands but no closer than 100 feet from any lease line without exception being granted by the Director, except that with respect to lease lines abutting or cornering lands for which the Commission has not at the time of the drilling permit application granted the right to drill 10-acre density wells, the well shall be located downhole no closer than 200 feet from the lease line so abutting or cornering such lands, and no more than four (4) Williams Fork Formation wells should be drilled downhole per governmental quarter quarter section, including the below-listed lands:
Township 5 South, Range 96 West, 6th P.M.
Section 33: N½ N½, less and except the West 32 rod of the NW¼
NW¼ containing 16 acres, more or less
Section 35: All
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 5 South, Range 96 West, 6th P.M.
Section 19: S½
Section 20: All
Section 29: All
Section 30: All
Section 31: All
Section 32: All
Township 6 South, Range 97 West, 6th P.M.
Section 1: S½
Section 2: S½
Section 11: All
Section 12: All
Section 13: All
Section 14: All
Section 21: All
Section 22: All
Section 28: All
Section 33: All
7. On October 4, 2005, Piceance and PDC, by its attorney, filed with the Commission a verified application for an order to establish 320-acre drilling and spacing units for the below-listed lands for production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group, and to increase the number of wells which can be optionally drilled into and produced from the Williams Fork Formation of the application lands to the equivalent of one well per 10 acres:
Township 5 South, Range 96 West, 6th P.M.
Section 19: S½
Section 20: All
Sections 29 through 32: All
Section 33: S½
Section 35: S½
Township 6 South, Range 96 West, 6th P.M.
Section 5: N½
Section 6: All
Section 18: All
Township 6 South, Range 97 West, 6th P.M.
Sections 1 and 2: S½
Sections 11 through 13: All
Section 14: S½
Sections 21 and 22: All
Section 28: All
Section 33: All
That as to all future Williams Fork Formation wells to be drilled upon the above-described lands, each well may be located anywhere downhole in the established 320-acre drilling and spacing unit but no closer than 100 feet from the boundaries of the unit or lease line, without exception being granted by the Director, except that with respect to units abutting or cornering lands for which the Commission has not at the time of the drilling permit application granted the right to drill 10-acre density wells, the well shall be located downhole no closer than 200 feet from the boundary of the drilling unit so abutting or cornering such lands, and no more than four (4) Williams Fork Formation wells should be drilled downhole per governmental quarter quarter section.
Applicants commit that wells to be drilled under this application will be drilled, on average, if topographically feasible throughout the lands, 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.
8. On November 21, 2005, Jelco G.V., Inc. ("Jelco") by its attorney, filed with the Commission a protest to the application stating its concerns that Jelco’s correlative rights may be adversely affected for the three wellbores owned by Jelco if the Applicants are allowed to drill closer than one thousand two hundred (1200) feet to Jelco’s wells located in Sections 12, 14 and 22 of Township 6 South, Range 97 West, 6th P.M.
9. On November 22, 2005, a prehearing conference was held with the Applicants and Jelco. On December 2, 2005, a joint letter from the Applicants and Jelco was filed with the Commission agreeing to bifurcate the issue of setbacks from Jelco wells from the remainder of the application so that an administrative hearing could be held regarding the establishment of 320-acre drilling and spacing units and increased well density. The hearing would be limited to the issue of setbacks and would be taken up at the Commission’s January 9, 2006 hearing. In addition, on December 5, 2005, a written request for a continuance was filed by Jelco, indicating concurrence by the Applicants, for the matter to be continued to the January 2006 hearing.
10. Testimony and exhibits presented at the administrative hearing showed that the application lands are located west of Rifle and northwest of the Grand Valley Field, and that one surface well pad will be used to drill four (4) wells on each 40-acre tract.
11. Testimony and exhibits presented at the administrative hearing showed the discontinuity of the Williams Fork Formation sands, and that although heterogeneous, the sands are not continuous in the vertical and lateral extents.
12. Testimony and exhibits presented at the administrative hearing showed that the average width of a point bar sand in the area is five hundred and five (505) feet thick, and that the average width of a meander belt sand in the area is eight hundred fifteen (815) feet thick.
13. Testimony and exhibits presented at the administrative hearing showed that some sands are bypassed with 40-acre well density and are encountered with 10-acre well density, that the Williams Fork Formation is a common source of supply, and that it is a tight, heterogeneous reservoir that supports 10-acre well density.
14. Testimony and exhibits presented at the administrative hearing showed the gas in place for a 640-acre section is estimated at 152 BCF, with 2.38 BCF on a 10-acre basis. Additional testimony indicated that one well on 10-acre density will recover seventy-five (75) percent of the gas in place.
15. Testimony and exhibits presented at the administrative hearing showed a rate of return of sixty-eight (68) percent with a payout of 1.45 years.
16. The Hearing Officer found that the above-referenced testimony and exhibits showed that the proposed spacing and density will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery and will not violate correlative rights. A recommendation to approve the application to establish 320-acre drilling and spacing units, and to approve the proposed setbacks except for the Jelco wells described in Finding No. 8 above, was made to the Commission at its hearing on January 9, 2006.
17. Piceance Gas Resources, LLC and Petroleum Development Corporation agreed to be bound by oral order of the Commission.
18. Land, geologic and engineering testimony was presented at the hearing in support of the Applicants’ position which described their belief that locating future Williams Fork Formation wells 400 feet from the Jelco wells would protect correlative rights while allowing incremental gas reserves to be recovered.
19. Land and engineering testimony was presented by Jelco regarding its belief that setbacks less than 800 feet would drain gas reserves from its wells and violate its correlative rights.
20. Based on the facts stated in the verified application, having been heard by the Hearing Officer who recommended approval, and based on the testimony presented to the Commission at the hearing, the Commission should enter an order to establish 320-acre drilling and spacing units for the certain lands in Townships 5 and 6, Ranges 96 and 97, West, 6th P.M., for production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group, increase the number of wells which can be optionally drilled into and produced from the Williams Fork Formation of the application lands to the equivalent of one well per 10 acres, and locate any future wells no closer than 400 feet from the three (3) wells operated by Jelco G.V., Inc.
ORDER
NOW, THEREFORE IT IS ORDERED, that 320-acre drilling and spacing units are hereby established for the below-listed lands for production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group:
Township 5 South, Range 96 West, 6th P.M.
Section 19: S½
Section 20: All
Sections 29 through 32: All
Section 33: S½
Section 35: S½
Township 6 South, Range 96 West, 6th P.M.
Section 5: N½
Section 6: All
Section 18: All
Township 6 South, Range 97 West, 6th P.M.
Sections 1 and 2: S½
Sections 11 through 13: All
Section 14: S½
Sections 21 and 22: All
Section 28: All
Section 33: All
IT IS FURTHER ORDERED, that the number of wells which can be optionally drilled into and produced from the Williams Fork Formation of the application lands shall be the equivalent of one well per 10 acres.
IT IS FURTHER ORDERED, that as to all future Williams Fork Formation wells to be drilled upon the above-described lands, except for wells located in proximity to the three (3) wells described below, each well shall be located anywhere downhole in the established 320-acre drilling and spacing unit but no closer than 100 feet from the boundaries of the unit or lease line, without exception being granted by the Director, except that with respect to units abutting or cornering lands for which the Commission has not at the time of the drilling permit application granted the right to drill 10-acre density wells, the well shall be located downhole no closer than 200 feet from the boundary of the drilling unit so abutting or cornering such lands, and no more than four (4) Williams Fork Formation wells shall be drilled downhole per governmental quarter quarter section.
IT IS FURTHER ORDERED, that any future Williams Fork Formation wells to be drilled upon the above-described lands in proximity to the below-described wells shall be located anywhere downhole in the established 320-acre drilling and spacing unit but no closer than 400 feet from the wellbores:
CSOC 697-12 #1 Well SW¼ SW¼ Section 12, Township 6 South, Range 97 West, 6th P.M.
CSOC 697-14 #1 Well SW¼ SW¼ Section 14, Township 6 South, Range 97 West, 6th P.M.
CSOC 697-12 #1 Well NE¼ NE¼ Section 22, Township 6 South, Range 97 West, 6th P.M.
IT IS FURTHER ORDERED, that, wells to be drilled under this application shall be drilled, on average, if topographically feasible throughout the lands, 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.
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 8th day of February, 2006, as of January 9, 2006.
CORRECTED this _______ day of February, 2006, as of January 9, 2006.
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
February 27, 2006