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 GRAND VALLEY FIELD, ) ORDER NO. 510-42
GARFIELD COUNTY, COLORADO )
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission at 9:00 a.m. on May 8, 2008, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to establish the SE¼ SW¼ as an approximate 40-acre drilling and spacing unit and the S½ SE¼ as an approximate 80-acre drilling and spacing unit, both in Section 28, Township 7 South, Range 96 West, 6th P.M., and allow one well per 10 acres to be drilled in said units, for the production of gas and associated hydrocarbons from the Williams Fork Formation.
FINDINGS
The Commission finds as follows:
1. Williams Production Company, (“Williams”), 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. Rule 318.a. of the Rules and Regulations of the Commission requires that wells drilled in excess of 2,500 feet in depth be located not less than 600 feet from any lease line, and located 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 subject to this Rule:
Township 7 South, Range 96 West, 6th P.M.
Section 28: SE¼ SW¼ (38.55 acres, per Construction Surveys, Inc.’s plat; 40 acres by BLM MT plat), S½ SE¼ (78.99 acres, per Construction Surveys, Inc.’s plat, 80 acres by MT plat), Garfield County, Colorado.
5. On May 16, 1994, the Commission issued Order No. 510-1, which among other things, allowed wells in certain lands including Section 28, Township 7 South, Range 96 West, 6th P.M. 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. Subsequent Order No. 510-20 allowed the equivalent of one well per 10 acres to be drilled on certain lands, including the S½ SE¼ of said Section 25, with the permitted well to be located no closer than 100 feet from the boundaries of the unit unless such unit abuts or corners lands in respect of which the Director of the Commission has not at the time of drilling permit application granted the right to drill Williams Fork Formation 10-acre density wells, in which event the wells shall be drilled downhole no closer than 200 feet from the unit 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.
6. On March 18, 2008, Williams, by its attorney, filed with the Commission a verified application to establish the SE¼ SW¼ as an approximate 40-acre drilling and spacing unit and the S½ SE¼ as an approximate 80-acre drilling and spacing unit, both in Section 28, Township 7 South, Range 96 West, 6th P.M., and allow one well per 10 acres to be drilled in said units, for the production of gas and associated hydrocarbons from the Williams Fork Formation.
7. On April 24, 2008, Williams, 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.
8. Testimony and exhibits submitted in support of the application showed that Williams is the majority leasehold owner in the application lands, and that 10-acre well density was already established on the lands within the proposed 80-acre drilling and spacing unit.
9. Testimony and exhibits submitted in support of the application showed that the Williams Fork Formation is member of the Mesaverde Group and is a common source of supply, but due to the heterogeneity of the formation and the frequency of different sand body widths, increased density is necessary to efficiently recover the reserves.
10. Testimony and exhibits submitted in support of the application showed that increasing density from 40-acre to 20-acre to 10-acre development increases recovery factors from 18% to 73% of the gas-in-place. Additional testimony indicated that not increasing well density shows that over 60% of the gas-in-place would be left in the ground and wasted. Further testimony showed that one well per 10 acres will recover incremental reserves preventing waste, while minimizing interference between wells and prevent the drilling of unnecessary wells. Pressure tests confirm the geology model. Testimony indicated that even with some pressure reduction, 10-acre density wells will produce substantial incremental reserves. Furthermore, testimony indicated that an average of approximately 10 acres are drained by one well in the application area.
11. The above-referenced testimony and exhibits show that the proposed spacing and density will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas, and will not violate correlative rights.
12. Williams Production Company agreed to be bound by oral order of the Commission.
13. 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 establish the SE¼ SW¼ as an approximate 40-acre drilling and spacing unit and the S½ SE¼ as an approximate 80-acre drilling and spacing unit, both in Section 28, Township 7 South, Range 96 West, 6th P.M., and allow one well per 10 acres to be drilled in said units, for the production of gas and associated hydrocarbons from the Williams Fork Formation.
NOW, THEREFORE IT IS ORDERED, that the SE¼ SW¼ is hereby established as an approximate 40-acre drilling and spacing unit and the S½ SE¼ is hereby established as an approximate 80-acre drilling and spacing unit, both in Section 28, Township 7 South, Range 96 West, 6th P.M., with one well per 10 acres allowed to be drilled in said units, for the production of gas and associated hydrocarbons from the Williams Fork Formation.
IT IS FURTHER ORDERED, that all future Williams Fork Formation wells drilled on the application lands shall be located downhole anywhere upon such lands be no closer than 100 feet from the outside boundary of the drilling and spacing unit unless such unit abuts or corners lands in respect of which the Commission has not at the time of the drilling permit application granted the right to drill 10-acre density downhole drilling for the Williams Fork Formation, in which event the Williams Fork Formation wells to be drilled upon the application lands shall be drilled downhole no closer than 200 feet from the portion of the boundary which so abuts or corners the lands in respect of which 10-acre density downhole drilling for the Williams Fork Formation wells has not been ordered by the Commission.
IT IS FURTHER ORDERED, that, except as previously authorized by order of the Commission, wells to be drilled under this application shall be drilled from the surface either vertically or directionally from no more than one pad located on the application lands unless exception is granted by the Colorado Oil and Gas Conservation Commission pursuant to application made for such exception.
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 May, 2008, as of May 8, 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
May 30, 2008