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 ) CAUSE NO. 517
OPERATIONS IN THE RATON AND VERMEJO )
COAL FORMATIONS, HUERFANO AND LAS ANIMAS ) ORDER NO. 517-3
COUNTIES, COLORADO ) AMENDED
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission at 8:30 a.m. on September 25, 2000 and October 31, 2000 in Suite 801, the Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving notice of hearing as required by law, on the application of Cedar Ridge, LLC, for an order establishing 160-acre drilling and spacing units for certain lands in Townships 29 through 31 South, Ranges 65 and 66 West, 6th P.M., for the production of methane gas from the Raton and Vermejo Coal Formations, approving as exception locations certain existing wells and pooling certain unleased mineral owners.
The Commission finds as follows:
1. Cedar Ridge, LLC (“Cedar Ridge”), 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 August 7, 2000, Cedar Ridge, LLC (“Cedar Ridge”), by its attorney, filed with the Commission a verified application for an order establishing 160-acre drilling and spacing units for the lands described below, for production from the Raton and Vermejo Coal Formations, with the permitted well to be located in each quarter section no closer than 600 feet from the boundaries of the unit:
Township 29 South, Range 66 West, 6th P.M.
Section 25: S½
Section 26: S½
Section 27: S½
Section 34 through 36: All
Township 30 South, Range 65 West, 6th P.M.
Sections 4 through 9: All
Sections 16 through 21: All
Sections 28 through 33: All
Township 30 South, Range 66 West, 6th P.M.
Sections 1 through 3: All
Sections 10 through 15: All
Sections 19 through 36: All
Section 3: W½
Sections 4 through 8: All
Section 9: E½
Sections 1 through 12: All
Sections 1 and 2: All
Sections 10 through 15: All
In addition, the Applicant requested the order allow the following existing wells, which are located on the subject lands outside of the setback requested above, be produced from the Raton Coal or Vermejo Coal Formations at exception locations:
Existing Well Location
Turcotte #21-3R T30S, R66W, Sec. 21: NW¼ SE¼, 2050’ FSL, 1890’ FEL
Turcotte #21-4 T30S, R66W, Sec. 21: SE¼NE¼, 2207’ FNL, 607’FEL
Ortiz School #34-1 T30S, R66W, Sec. 34: NE¼SW¼, 1738’ FWL, 2279’ FSL
Adobe Canyon #25-11 T30S, R66W, Sec. 25: NE¼SW¼, 2166’ FWL, 2401’FSL
Spring Canyon #22-4 T30S, R66W, Sec. 22: SW¼SE¼, 747’ FSL, 2198’ FEL
County Line #27-1 T30S, R66W, Sec. 27: SW¼NE¼, 1534’ FNL, 2068’ FEL
Wheeler Canyon #36-3 T30S, R66W, Sec. 36: NE¼SW¼, 2098’ FSL, 1679’ FWL
Wheeler Canyon #36-4 T30S, R66W, Sec. 36: NW¼SE¼, 2466’ FSL, 1363’ FEL
Adobe Canyon #30-2 T30S, R65W, Sec. 30: SW¼NW¼, 1590’ FNL, 282’ FWL
Further, Cedar Ridge requested an order be issued pooling all unleased mineral owners who refuse to lease or participate in the drilling of the proposed wells within the above described drilling and spacing units, that such owners be treated as non-consenting owners under §34-60-116, C.R.S. and Rule 530. of the Commission, subject to the terms and penalties provided for therein.
5. On September 12, 2000 a Local Public Forum on the application was held in Walsenburg to consider potential issues related to the environment, public health, safety and welfare.
6. On September 11 and 12, 2000, an intervention and protests were filed by the Blackhawk Ranch Property Owners Association, Blackhawk Ranch LLC and Land Properties Inc. and the Town of Aguilar raising issues regarding public health, safety, welfare and the environment. On September 14, 2000 Byron L. Foreman & Associates, Inc. filed with the Commission a protest to the pooling portion of the application. On September 20, 2000, a prehearing conference was convened with the parties, and it was decided that the protests filed by Blackhawk Ranch LLC and the Town of Aguilar should be treated as interventions. The intervenors indicated they filed solely to raise issues regarding potential impacts to public health, safety, welfare and the environment and did not intend to present testimony on the issues of establishing 160-acre drilling and spacing units. They agreed to allow the spacing matter to be heard at an administrative hearing on September 22, 2000.
7. At the administrative hearing Cedar Ridge requested the following three wells be approved as exceptions to the proposed permitted well location, bringing the total number of exception locations to twelve.
Turcotte #21-2 T30S, R66W, Sec. 21: NE¼SW¼, 2175’ FSL and 1561’ FWL
Merritt #29-2 T30S, R65W, Sec. 29: SW¼NW¼, 1799’ FNL and 713’ FWL
Spring Canyon #20-2 T30S, R66W, Sec. 20: SW¼NW¼, 2150’ FNL and 753’ FWL
8. Testimony and exhibits presented at the administrative hearing described the topography and stratigraphy of the Raton Basin indicating the Raton Formation has an average thickness of 1400 feet with an average net thickness of 20 feet in the application area and the Vermejo Formation has an average thickness of 350 feet with an average net coal thickness of 18 feet in the application area.
9. Testimony and exhibits presented at the administrative hearing indicated that although the Raton and Vermejo Formations are common sources of supply, the coals are not continuous. The discontinuities are due to the depositional process of the coals and the numerous igneous sills in the area.
10. Engineering testimony and exhibits presented at the administrative hearing showed recovery efficiency vs. time for possible spacing patterns. In the Vermejo Coal Formation, 80-acre spacing showed the highest recovery efficiency of 68%. In the Raton Coal Formation, maximum recovery efficiency was 39% on 80-acre spacing.
11. Testimony and exhibits presented at the administrative hearing showed that Vermejo Coal Formation wells drilled on 160-acre spacing are more economic than wells drilled on 80-acre spacing up to a gas price of $3.50 per MMBTU and that wells drilled only to the Raton Coal Formation are uneconomic.
12. Testimony and exhibits presented at the administrative hearing showed existing water wells in the application area vary in depth from 20 to 600 feet and the Vermejo Formation in the application area is at a depth of 1600 feet. Further testimony was presented indicating that surface casing will be set fifty (50) feet deeper than the deepest water well within a one (1) mile radius and that casing will be cemented to surface.
13. On September 23, 2000, Stewart Petroleum Corporation submitted a letter in support of the application to establish 160-acre drilling and spacing units for the Raton and Vermejo Coal Formations.
14. At the Administrative Hearing, Cedar Ridge, LLC agreed to be bound by oral order of the Commission.
15. On September 25, 2000, the Commission, having received no protests on the spacing portion of the application, and having heard the findings of the Hearing Officer who recommended approval of the spacing portion of the application, approved the request to establish 160-acre drilling and spacing units for production from the Raton and Vermejo Coal Formations, with the permitted well to be located no closer than 600 feet from the boundaries of the unit. In addition, the Commission approved twelve (12) existing wells as exceptions to the permitted well locations described above. Further, the Commission continued the pooling request and the public health, safety, welfare and environmental issues raised by the intervenors to the October hearing.
16. On September 28, 2000 a prehearing conference was held at which time the Hearing Officer described the process and amount of time designated for the intervenors and the applicant to make their presentations in favor of or in opposition to convening a Public Issues Hearing. In addition, Cedar Ridge proposed to draft a Public Health, Safety, Welfare and Environmental Plan to which the intervenors and COGCC staff could comment and propose changes. Several changes to the plan were made based on comments received from the intervenors and COGCC staff. On October 20, 2000, Cedar Ridge presented its final Public Health, Safety, Welfare and Environmental Plan to the intervenors and the Commission.
17. At the October 31, 2000 hearing, COGCC staff presented an analysis in favor of the Public Health, Safety, Welfare and Environmental Plan proposed by Cedar Ridge and recommended that no Public Issues Hearing be convened.
18. Cedar Ridge briefly described its plan to the Commission and indicated that after drilling just four (4) wells in the application lands the success of this project is still unknown.
19. The Town of Aguilar presented a written statement to the Commission regarding concerns about the town’s watersheds and requested the Commission convene a Public Issues Hearing.
20. Blackhawk Ranch Property Owners Association described to the Commission the concerns about gas operations in residential subdivisions, asked that high density rules apply to operators in Blackhawk Ranch, and requested the Commission convene a Public Issues Hearing. In addition, Blackhawk Ranch objected to the hearing process and the limited amount of time allotted.
21. Blackhawk Group agreed with Blackhawk Ranch’s procedural objections, urged the Commission to apply its high density rules to the rural residential area within the application lands and requested the Commission convene a Public Issues Hearing.
22. After deliberation, the Commission denied the motions to convene a Public Issues Hearing stating that both the Commission’s Rules and Regulations and Cedar Ridge’s Plan adequately protect public health, safety, welfare and the environment in the application area. The Commission approved the application and the Plan and requested Commission staff monitor operations in the area, advising the Commission should problems occur.
23. At the October 31, 2000 hearing the applicant requested the pooling matter be continued to December. Subsequent to the hearing on November 15, 2000, Cedar Ridge filed with the Commission a written request to withdraw the pooling matter; accordingly the hearing on pooling has been canceled.
NOW, THEREFORE IT IS ORDERED that 160-acre drilling and spacing units are hereby established for production of gas from the Raton and Vermejo Coal Formations for the lands described below, with the permitted well to be located in each quarter section no closer than 600 feet from the boundaries of the unit:
Township 29 South, Range 66 West, 6th P.M.
Section 25: S½
Section 26: S½
Section 27: S½
Sections 34 through 36: All
Township 30 South, Range 65 West, 6th P.M.
Sections 4 through 9: All
Sections 16 through 21: All
Sections 28 through 33: All
Township 30 South, Range 66 West, 6th P.M.
Sections 1 through 3: All
Sections 10 through 15: All
Sections 19 through 36: All
Township 31 South, Range 65 West, 6th P.M.
Section 3: W½
Sections 4 through 8: All
Section 9: E½
Township 31 South, Range 66 West, 6th P.M.
Sections 1 through 12: All
Township 31 South, Range 67 West, 6th P.M.
Sections 1 and 2: All
Sections 10 through 15: All
IT IS FURTHER ORDERED, that Cedar Ridge, LLC’s Public Health, Safety, Welfare and Environmental Plan is hereby adopted and made part of this order as described in Exhibit “A”.
IT IS FURTHER ORDERED, that the following existing wells, which are located on the subject lands outside of the setback requested above, are hereby approved to be produced from the Raton Coal or Vermejo Coal Formations at exception locations:
Existing Well Location
Turcotte #21-3R T30S, R66W, Sec. 21: NW¼ SE¼, 2050’ FSL, 1890’ FEL
Turcotte #21-4 T30S, R66W, Sec. 21: SE¼NE¼, 2207’ FNL, 607’FEL
Ortiz School #34-1 T30S, R66W, Sec. 34: NE¼SW¼, 1738’ FWL, 2279’ FSL
Adobe Canyon #25-11 T30S, R66W, Sec. 25: NE¼SW¼, 2166’ FWL, 2401’FSL
Spring Canyon #22-4 T30S, R66W, Sec. 22: SW¼SE¼, 747’ FSL, 2198’ FEL
County Line #27-1 T30S, R66W, Sec. 27: SW¼NE¼, 1534’ FNL, 2068’ FEL
Wheeler Canyon #36-3 T30S, R66W, Sec. 36: NE¼SW¼, 2098’ FSL, 1679’ FWL
Wheeler Canyon #36-4 T30S, R66W, Sec. 36: NW¼SE¼, 2466’ FSL, 1363’ FEL
Adobe Canyon #30-2 T30S, R65W, Sec. 30: SW¼NW¼, 1590’ FNL, 282’ FWL
Turcotte #21-2 T30S, R66W, Sec. 21: NE¼SW¼, 2175’ FSL, 1561’ FWL
Merritt #29-2 T30S, R65W, Sec. 29: SW¼NW¼, 1799’ FNL, 713’ FWL
Spring Canyon #20-2 T30S, R66W, Sec. 20: SW¼NW¼, 2150’ FNL, 753’ FWL
IT IS FURTHER ORDERED, that the Director, without further notice and hearing, shall be allowed to approve exceptions to the permitted well locations due to topography, surface considerations or to avoid conflicts with coal mining operations.
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.
ENTERED this 22nd day of November 2000, as of October 31, 2000.
AMENDED this day of December 2000, as of October 31, 2000.
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
December 14, 2000
Exhibit “A”
CEDAR RIDGE, LLC
PUBLIC HEALTH, SAFETY, WELFARE AND ENVIRONMENTAL PLAN
Introduction
This Plan addresses public health, safety, and welfare issues associated with the Raton and Vermejo Coal Spacing Application filed with the Colorado Oil and Gas Conservation Commission (“COGCC”) by Cedar Ridge, LLC.
Reliance on COGCC Rules
Cedar Ridge, LLC (“Cedar Ridge”) maintains that the COGCC rules are adequate to address health, safety, welfare and environmental issues in the application area. Cedar Ridge has agreed to comply with all of the rules applicable to it in the spaced area and consents to this Plan being made part of the final COGCC Order in its Application. As the COGCC is aware, the Cedar Ridge application permits only one well per 160 acres, rather than the multitude of wells which could be drilled to these formations absent spacing. In order to highlight the applicability of existing rules, Cedar Ridge agrees to comply with all present COGCC rules regarding the following:
· Visual Impact Rules (Rule 804);
· Surface Owner Notice and Surface Owner Consultation Rules (Rules 305 and 306);
· Surface Restoration, Rehabilitation and Bonding Rules (Rules 333, 703, 705 and the 1000 series);
· Venting or Flaring Rules (Rule 607);
· Fire Prevention and Protection Rules (Rule 606.a);
· General Safety Rules (Rule 602, et seq.);
· Pollution Prevention Rules (Rules 208-209, 324.a, and 900 series);
· Groundwater Protection Rules (Rules 314, 317, 319, 324.b, 324.d, 325, 326, 333, and 900 series); and
· Access Roads (Rule 1002)
In addition to the COGCC Rules, Cedar Ridge agrees to the following additional conditions to be placed upon its operations and made part of the final COGCC Order:
Water Well Monitoring
A. Water Quality
Cedar Ridge shall test domestic water wells to which it is granted access that are: 1) registered with the Colorado State Engineer’s Office and 2) located within the Application Area and within one mile of a proposed well (“water quality testing well”). The “initial baseline testing” described in this paragraph will include all major cations and anions, TDS, iron and manganese, dissolved methane, pH, and specific conductance and field hydrogen sulfide.
If free gas or a methane concentration level greater than 5.0 mg/L is detected in a water quality testing well, compositional analysis and carbon isotopic analyses of methane carbon shall be performed to determine gas type (thermogenic, biogenic, or an intermediate mix of both). If the testing results reveal biogenic gas, no further isotopic testing shall be done. If the carbon isotope test results in a thermogenic or intermediate mix signature, annual testing shall be done thereafter and an action plan shall be drafted by Cedar Ridge to determine the source of the gas. If the methane concentration level increases by more than 5 mg/L between sampling periods, or increases to more than 10 mg/L, an action plan shall be drafted to determine the source of the gas.
The initial baseline testing shall occur prior to the drilling of the well. Within one year after completion of the well, a “post completion” test shall be performed for the same parameters above and repeated three and six years thereafter. If no significant changes from the baseline have been identified after the third test (the six year test), no further testing shall occur. Additional “post completion” test(s) may be conducted if changes in water quality are identified during follow-up testing.
Copies of all test results described above shall be provided to the COGCC and the surface owner where the water quality testing well is located within two (2) weeks of Cedar Ridge’s receipt of test results.
B. Water Well Fluid Level
Cedar Ridge shall drill a shallow aquifer monitoring well within one mile of the Town of Aguilar’s claimed watershed. This monitoring well shall be drilled within twelve (12) months of the adoption of this Plan on a gas well pad selected by Cedar Ridge and approved by the COGCC. The monitoring well shall be drilled to a depth equal to the average depth of the three nearest Town of Aguilar water wells or to 500 feet, whichever is deeper. Cedar Ridge shall engage an independent hydrologist to monitor the fluid level of this monitoring well on a quarterly basis. Representatives of the Town of Aguilar and the COGCC may witness the quarterly monitoring at their discretion. Results of fluid level monitoring shall be sent directly from the independent hydrologist to the COGCC and to Cedar Ridge on a quarterly basis. Cedar Ridge shall also treat this well as a “water quality testing well” under Part A above.
If a material change in fluid level is detected for three (3) consecutive periods, Cedar Ridge shall develop an action plan in conjunction with the independent hydrologist selected by Cedar Ridge, and the COGCC environmental staff. The collaborative action plan shall propose methods to determine the cause of the fluid level changes, and possible remediation methods which could be required and shall address other appropriate actions.
C. Groundwater Hydrology Report
Cedar Ridge shall provide a groundwater hydrology report to the COGCC from an independent hydrologist of its selection by June 1, 2001. This report shall evaluate surface and ground water quantity and quality issues in the aquifer and watershed within the Application Area. In conjunction with this report, Cedar Ridge shall also provide to the COGCC, the seventeen (17) baseline water well samples it has voluntarily collected and had independently analyzed measuring groundwater quality from the Application Area. Cedar Ridge shall also provide to the COGCC the sixteen (16) baseline water samples from surface waters it has voluntarily collected and had independently analyzed from the Application Area.
D. Reservoir Pressure Monitoring
Cedar Ridge shall measure static reservoir pressure in one gas well per section in which a gas well is drilled within the Application Area. Results of these pressure tests shall be provided to the COGCC upon receipt by Cedar Ridge. In the event that such test reflects that the pressure gradient in a gas well is equal to the shallow aquifer pressure in the area, all gas wells in such section shall be measured.
Seep Monitoring
There are studies ongoing concerning seepage of gas at the Coal Outcrop. None of these seeps are located within or near the Application Area. Cedar Ridge has supported and shall continue to support such studies on a voluntary basis through sponsorship and participation in the ongoing seep studies.
Spills
Cedar Ridge shall comply with all applicable Federal, State or COGCC rules and regulations pertaining to the reporting and remediation of spills of produced water, chemicals or waste.
Noise, Visual and Subdivisions
Cedar Ridge shall work with landowners to minimize noise and visual impacts from its operations within existing subdivisions while still attempting to maximize production pursuant to COGCC rules and regulations. This commitment includes the following:
1. Cedar Ridge shall comply with COGCC Rule 802. in all operations including compression.
2. Alternative lift technologies, where technically and economically feasible, shall be utilized for surface actuation of downhole pumps when artificial lift is necessary for a producing well. These technologies include, but are not limited to, progressive cavity pumps, low profile pumps or pneumatic lift.
3. Operators shall comply with COGCC Rule 603.b. addressing high density areas as applicable.
4. Security fencing shall be placed around wellheads and pumping equipment if requested by the surface owner.
5. Existing private subdivision roads shall be graded if Cedar Ridge’s operations cause roadway problems.
6. Cedar Ridge shall remove non-operational facilities (which are not anticipated to be needed on the site in the foreseeable future) from current and future installations within one year from the time the facilities become non-operational.
7. Cedar Ridge shall utilize electric power to operate pumping units provided such power is made available from the local power company.
Wildlife
The Colorado Division of Wildlife (CDOW) shall be advised by Cedar Ridge regarding the location of the proposed well sites. Its timely input on the location of sensitivities may be considered to avoid conflicts with wildlife resources. To the extent practical, activities shall be scheduled to avoid these areas.
Surface Water
Cedar Ridge shall comply with all applicable Federal or State regulations governing storm water management and shall conduct all surface discharge of produced water in conjunction with its Colorado Wastewater Discharge Permit issued by the Colorado Department of Public Health and Environment.
Air
Cedar Ridge shall comply with all applicable Federal or State rules and regulations governing emissions.
Dust Abatement and Road Maintenance
Wherever possible, Cedar Ridge shall attempt to utilize existing roads to access the proposed wells. During periods of heavy use such as during drilling and completion operations, Cedar Ridge shall apply water to unpaved roads to help control dust, if necessary.
Cedar Ridge shall file an Emergency Preparedness Plan (“EPP”) with Las Animas and Huerfano Counties. The EPP shall include as-built facilities maps showing the location of all wells, pipelines and other facilities as well as a personnel contact list in the event of an emergency. The EPP shall be updated on an annual basis or as conditions change.
Should the proposed well program contemplated by Cedar Ridge be abandoned due to economics, lack of production or otherwise, Cedar Ridge shall be permitted to request that the Commission grant it relief from ongoing monitoring obligations described herein.