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 OPERATIONS FOR THE WILLIAMS FORK AND ILES FORMATIONS, GRAND VALLEY FIELD, GARFIELD COUNTY, COLORADO

)

)

)

)

)

CAUSE NO. 510

 

DOCKET NO. 1407-UP-196

 

ORDER NO. 510-68

 

REPORT OF THE COMMISSION

 

The Commission heard this matter on September 15, 2014, at the offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon application for an order to subject any nonconsenting interests within an approximate 160-acre drilling and spacing unit established for Section 13, Township 7 South, Range 96 West, 6th P.M., to the cost recovery provisions of §34-60-116(7), C.R.S. for the drilling of the Island Ranch 23A-13, Island Ranch 23B-13, Island Ranch 23C-13, Island Ranch 23D-13, Island Ranch 24A-13, Island Ranch 24B-13, Island Ranch 24C-13, and Island Ranch 24D-13 Wells (“Wells”), for the development and operation of the Williams Fork and Iles Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Caerus Piceance LLC (“Caerus” 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 April 16, 2012, the Commission entered Order Nos. 440-66, 479-21 and 510-58, which vacated Order No. 479-2, and established two approximate 160-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Williams Fork and Iles Formations of the Mesaverde Group. Section 13, Township 7 South, Range 96 West, 6th P.M. is subject to this Order for the Williams Fork and Iles Formations.

 

5.         On March 17, 2014, the Commission entered Order No. 510-67, which pooled all interests in an approximate 160-acre drilling and spacing unit for the development and operation of the Williams Fork and Iles Formations and subjected all non-consenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the Nolte 13A-13 Well (API No. 05-045-22308), Nolte 13B-13 Well (API No. 05-045-22298), Nolte 13C-13 Well (API No. 05-045-22307), Nolte 13D-13 Well (API No. 05-045-22305), Nolte 14A-13 Well (API No. 05-045-22310), Nolte 14B-13 Well (API No. 05-045-22311), Nolte 14C-13 Well (API No. 05-045-22300), and Nolte 14D-13 Well (API No. 05-045-22304).  Section 13, Township 7 South, Range 96 West, 6th P.M. is subject to this Order for the Williams Fork and Iles Formations.

 

6.         On May 29, 2014, Caerus, by its attorneys, filed a verified application pursuant to §34-60-116, C.R.S., for an order to subject any nonconsenting interests within an approximate 160-acre drilling and spacing unit established for the below-described lands (“Application Lands”) to the cost recovery provisions of §34-60-116(7), C.R.S., effective as of the earlier of the date of the Application, or the date the costs are specified under §34-60-116(7), C.R.S., were first incurred for the drilling of the Island Ranch 23A-13 Well (API No. 05-045-22400), Island Ranch 23B-13 Well (API No. 05-045-22403), Island Ranch 23C-13 Well (API No. 05-045-22399), Island Ranch 23D-13 Well (API No. 05-045-22393), Island Ranch 24A-13 Well (API No. 05-045-22400), Island Ranch 24B-13 Well (API No. 05-045-22394), Island Ranch 24C-13 Well (API No. 05-045-22404), and Island Ranch 24D-13 Well (API No. 05-045-22396), for the development and operation of the Williams Fork and Iles Formations:

 

                        Township 7 South, Range 96 West, 6th P.M.

                        Section 13:      SW¼

 

7.         On July 15, 2014, Caerus, 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.

 

8.         On July 22, 2014, Caerus, by its attorneys, requested a continuance to the September hearing.

 

9.         Land testimony and exhibits submitted in support of the Application by Aubree Besant, Land Manager for Caerus, showed that all nonconsenting interest owners were notified of the Application and received an Authority for Expenditure ("AFE") and offer to participate in the 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 30 days prior to the July 28, 2014 hearing date.

 

10.       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 Island Ranch 23A-13, Island Ranch 23B-13, Island Ranch 23C-13, Island Ranch 23D-13, Island Ranch 24A-13, Island Ranch 24B-13, Island Ranch 24C-13, and Island Ranch 24D-13 Wells (“Wells”), but did not provide testimony for any subsequent wells.

 

11.       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.

 

12.       Caerus 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 Unit review of the Application under Rule 511., the Commission should enter an order to subject any nonconsenting interests within an approximate 160-acre drilling and spacing unit established for Section 13, Township 7 South, Range 96 West, 6th P.M., to the cost recovery provisions of §34-60-116(7), C.R.S. for the drilling of the Island Ranch 23A-13, Island Ranch 23B-13, Island Ranch 23C-13, Island Ranch 23D-13, Island Ranch 24A-13, Island Ranch 24B-13, Island Ranch 24C-13, and Island Ranch 24D-13 Wells (“Wells”), for the development and operation of the Williams Fork and Iles Formations.


 

 

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 non-consenting interests within an approximate 160-acre drilling and spacing unit established for the below-described lands, are hereby subject to the cost recovery provisions of §34-60-116(7), C.R.S., effective as of the earlier of the date of the Application, or the date that any of the costs specified in §34-60-116(7)(b), C.R.S. are first incurred for the drilling of for the Island Ranch 23A-13 Well (API No. 05-045-22400), Island Ranch 23B-13 Well (API No. 05-045-22403), Island Ranch 23C-13 Well (API No. 05-045-22399), Island Ranch 23D-13 Well (API No. 05-045-22393), Island Ranch 24A-13 Well (API No. 05-045-22400), Island Ranch 24B-13 Well (API No. 05-045-22394), Island Ranch 24C-13 Well (API No. 05-045-22404), and Island Ranch 24D-13 Well (API No. 05-045-22396), for the development and operation of the Williams Fork and Iles Formations:

 

                        Township 7 South, Range 96 West, 6th P.M.

                        Section 13:      SW¼

 

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 non-consenting leased (working interest) 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 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.  Any party seeking the cost recovery provisions of §34-60-116(7), C.R.S., shall first comply with subsection (d) for any subsequent well(s).

 

5.         Each non-consenting 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  22nd  day of September, 2014, as of September 15, 2014.           

 

 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary