IN THE MATTER OF THE PROMULGATION
CAUSE NO. 517
AND ESTABLISHMENT OF FIELD RULES TO
GOVERN OPERATIONS IN THE PURGATORY
ORDER NO. 517-8
RIVER FIELD, LAS ANIMAS COUNTY, COLORADO
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission on March 18, 2002 at 10:00
a.m. in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado
for an order to establish a 160-acre drilling and spacing unit for the
production of oil and gas from the Raton and Vermejo Formations and an order
pooling all nonconsenting interests in the unit.
FINDINGS
The Commission finds as follows:
1. Petrogulf Corporation (“Petrogulf”), 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 October 31, 2000, the Commission issued Order No. 517-3 which among other
things established 160-acre drilling and spacing units for production of methane
gas from the Raton and Vermejo Formations for certain lands, with the permitted
well to be located no closer than 600 feet from the boundaries of the unit.
5. On January 25, 2002, Petrogulf filed with the Commission a verified
Application for an order to establish a 160-acre drilling and spacing unit
consisting of the SW¼ of Section 15, Township 33 South, Range 67 West, 6th P.M.
for the production of oil and gas from the Raton and Vermejo Formations. In
addition, the Applicant sought an order pooling all nonconsenting interests in
the SW¼ of Section 15, Township 33 South, Range 67 West, 6th P.M. for the
development and operation of the Raton and Vermejo Formations. Petrogulf
proposes to drill the Parsons 23-15V Well in the NE¼ SW¼ of Section 15 and
wishes to be designated as the operator for the SW¼ of Section 15, Township 33
South, Range 67 West, 6th P.M.
6. Testimony and exhibits presented at the administrative hearing showed the
location of the Petrogulf acreage is approximately three (3) miles north of the
town of Weston.
7. Testimony and exhibits presented at the administrative hearing indicate that
75% of the mineral interests in the SW¼ of Section 15 are leased by Petrogulf,
with the remaining 25% of the mineral interests leased by Evergreen Operating
Corporation.
8. Testimony and exhibits presented at the administrative hearing indicated the
net Vermejo Coal thickness in the area with the coal thickness anticipated to be
thirty (30) feet in the SW¼ of Section 15. The structure in this area dips to
the north with the base of the Vermejo Coal at 5350 feet in the SW¼ of Section
15.
9. Testimony and exhibits presented at the administrative hearing indicated that
the drilling of two wells per 160-acre drilling and spacing unit would recover
only 3% additional reserves. Economic calculations presented showed that one
well per 160-acre drilling and spacing unit would be economic. Testimony
indicated that 160-acre drilling and spacing units have been approved in all
other Vermejo Coal spacing hearings in Las Animas County.
10. Testimony and exhibits presented at the administrative hearing indicate that
on September 14, 2001, Petrogulf tendered an offer to Evergreen Operating
Corporation to participate in the drilling of the Parsons 23-15 Well, to sell
their leasehold to Petroglulf or farm out their interest to Petrogulf. Evergreen
Operating Corporation declined to participate in a letter dated September 27,
2001. On January 9, 2002 Petrogulf renewed its offer from September 14, 2001 and
included an AFE containing a cost estimate for the well, information on the
depth and location of the well, and the estimated spud date of the well.
Evergreen has not responded to this offer.
11. At the time of the administrative hearing, Petrogulf Corporation agreed to
be bound by oral order of the Commission.
12. Based on the facts stated in the verified application, having received no
protests and having been heard by the Hearing Officer who recommended approval,
the Commission should approve an order to establish a 160-acre drilling and
spacing unit for the production of oil and gas from the Raton and Vermejo
Formations and an order pooling all non-consenting interests in the unit.
ORDER
NOW, THEREFORE IT IS ORDERED, that a 160-acre drilling and spacing unit
consisting of the SW¼ of Section 15, Township 33 South, Range 67 West, 6th P.M.
is hereby established for the production of oil and gas from the Raton and
Vermejo Formations.
IT IS FURTHER ORDERED, that 1. Pursuant to the provisions of §34-60-116, C.R.S.
as amended, of the Oil and Gas Conservation Act of the State of Colorado, all
interests in the 160-acre drilling and spacing units described below are hereby
pooled for the development and operation of the Raton and Vermejo Coal
Formations.
Township 33 South, Range 67 West, 6th P.M.
Section 15: SW¼
2. The production obtained from said drilling 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 said drilling unit;
each owner of an interest in said drilling unit shall be entitled to receive
his/her share of the production of the well located on said drilling unit
applicable to his interest in said drilling unit.
3. Said owner is hereby deemed to have elected not to participate and shall
therefore be deemed to be nonconsenting as to the well(s) and be subject to the
penalties as provided for by §34 60 116 (7).
4. Any nonconsenting unleased mineral owner within the spacing unit shall be
treated as the owner of the landowner's royalty to the extent of 12.5% of
his/her record title interest, whatever that interest may be, until such time as
the consenting owner recovers, only out of the 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, the nonconsenting
mineral owner shall then own his/her proportionate 8/8ths share of the well,
surface facilities and production, and then be liable for his/her proportionate
share of further costs incurred in connection with the well as if he/she had
originally agreed to the drilling.
5. The operator of any well drilled on the above-described unit shall furnish
all non consenting 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.
IT IS FURTHER ORDERED that Petrogulf shall be designated the operator for the
Parsons 23-15V Well to be located in the NE¼ SW¼ of Section 15, Township 33
South, Range 67 West, 6th P.M. for the 160-acre drilling and spacing unit
consisting of the SW¼ of Section 15, Township 33 South, Range 67 West, 6th P.M.
ENTERED this 25th day of March, 2002, as of March 18, 2002.
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 March 25, 2002
(517-8)