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, MAMM CREEK AND KOKOPELLI FIELDS, GARFIELD COUNTY, COLORADO

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CAUSE NO. 513

 

DOCKET NO. 1404-UP-125

 

ORDER NO. 513-8

 

REPORT OF THE COMMISSION

 

The Commission heard this matter on April 28, 2014, at the offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon an application for an order to pool all interests within an approximate 320-acre drilling and spacing unit established for Section 12, Township 6 South, Range 92 West, 6th P.M., and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S. for the Frei A23 Well, the Frei A24 Well, the Frei A20 Well, the Frei A19 Well, and the Frei A14 Well, for the development and operation of the Williams Fork and Iles Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Ursa Operating Company LLC (“Ursa” 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 February 22, 2010, the Commission entered Order Nos. 513-6 and 523-6 which, among other things, established an approximate 320-acre standup drilling and spacing unit for the E˝ of Section 12, Township 6 South, Range 92 West, 6th P.M., and approved the equivalent of one well per 10 acres well density, for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.

           

5.         On February 27, 2014, Ursa, by its attorneys, filed with the Commission pursuant to §34-60-116 C.R.S., a verified application (“Application”) for an order to pool all interests in an approximate 320-acre drilling and spacing unit established for the below-described lands (“Application Lands”), for the development and operation of the Williams Fork and Iles Formations, effective as of the date of the Application, for the drilling of the initial permitted Williams Fork or Iles Formation wells (“Initial Wells”), and to subject any nonconsenting interests to the cost recovery provisions of C.R.S. §34-60-116(7):

 

                        Township 6 South, Range 92 West, 6th P.M.

                        Section 12:      E˝  

 

 

6.         On April 15, 2014, Ursa, 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.

 

7.         Land testimony and exhibits submitted in support of the Application by Jarred McGhee, showed that all nonconsenting interest owners were notified of the Application and received an Authority for Expenditure ("AFE") and offer to participate in the Initial 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 April 28, 2014 hearing date.

 

8.         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 Initial Wells: the Frei A23 Well, the Frei A24 Well, the Frei A20 Well, the Frei A19 Well, and the Frei A14 Well, but did not provide testimony for any subsequent wells.

 

9.         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.

 

10.       Ursa agreed to be bound by oral order of the Commission. 

 

11.       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., the Commission should enter an order to pool all interests within an approximate 320-acre drilling and spacing unit established for Section 12, Township 6 South, Range 92 West, 6th P.M., and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S. for the Frei A23 Well, the Frei A24 Well, the Frei A20 Well, the Frei A19 Well, and the Frei A14 Well, 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 interests in the approximate 320-acre drilling and spacing unit established for the below-described lands, are hereby pooled, for the development and operation of the Williams Fork and Iles Formations, effective as of the date of the Application

 

                        Township 6 South, Range 92 West, 6th P.M.

                                    Section 12:      E˝  

 

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 each of the Initial Wells located on the drilling and spacing unit applicable to its interest in the drilling and spacing unit.

 

3.         The nonconsenting leased (working interest) owners must reimburse the consenting working interest owners for their share of the costs and risks of drilling and operating each of the Initial Wells (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 Initial Wells 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 nonconsenting 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 each of the Initial Wells, surface facilities and production, and then be liable for its proportionate share of further costs incurred in connection with each Initial Well as if it had originally agreed to the drilling.

 

6.         The operator of each of the Initial Wells 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   23rd  day of May, 2014, as of April 28, 2014.                     

 

 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary