BEFORE THE OIL AND GAS CONSERVATION COMMISSION
IN THE MATTER OF THE PROMULGATION AND )
ESTABLISHMENT OF FIELD RULES TO GOVERN ) CAUSE NO. 520
OPERATIONS IN THE OAKDALE FIELD, )
HUERFANO COUNTY, COLORADO ) ORDER NO. 520-3
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission at 10:00 a.m. on June 4, 2002 in the Anasazi Room, La Plata County Courthouse, 1060 E 2nd Avenue, Durango, Colorado on the verified application of Rocky Mountain Gas Supply, LLC for an order to pool all nonconsenting interests in a 160-acre drilling and spacing unit for the development and operation of the Dakota and Entrada Formations.
FINDINGS
The Commission finds as follows:
1. Rocky Mountain Gas Supply, LLC (“Rocky Mountain Gas”), as applicant herein, is an interested party in the subject matter of the above-referenced matter.
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 December 17, 1999, the Commission issued Order No. 520-1 which established 160-acre drilling and spacing units for the production of oil, gas (including CO2) and associated hydrocarbons from the Dakota and Entrada Formations underlying the below-listed lands with the permitted well to be located no closer than 600 feet from the outer boundaries of the drilling unit.
Township 28 South, Range 69 West, 6th P.M.
Section 33: All
Township 29 South, Range 69 West, 6th P.M.
Section 5: S½
Sections 8-9: All
Section 16: N½
Section 17: NE¼
5. On April 15, 2002, Rocky Mountain Gas Supply, LLC, (“Rocky Mountain Gas”) by its attorney filed with the Commission a verified Application for an order to pool all nonconsenting owners in the 160-acre drilling and spacing unit consisting of the SW¼ of Section 33, Township 28 South, Range 69 West, 6th P.M. for the development and operation of the Dakota and Entrada Formations. The applicant intends to drill the Harry Willis No. 4 Well in the SW¼ of Section 33 for the production of gas (including CO2) and associated hydrocarbons from the Dakota and Entrada Formations.
6. On May 20, 2002, Three Valleys West, LLC filed in writing a protest to the application. A prehearing conference was held May 29, 2002 at which time the Hearing Officer stated that the protest was not valid with respect to the subject matter of the application. The attorney for Three Valleys West, LLC agreed and indicated his client did not intend to protest the pooling application but was concerned about the surface use agreement with Rocky Mountain Gas. He further indicated that no one from Three Valleys planned to attend the hearing and he did not object to an administrative hearing being conducted on the matter. An administrative hearing was then scheduled for May 30, 2002.
7. Testimony and exhibits presented at the administrative hearing showed the platted subdivision lots and the proposed well location. Additional testimony indicated that Rocky Mountain Gas has over 75% of the minerals leased in Section 33 and is still negotiating to lease or purchase minerals with several other owners. Further testimony indicated that all Rocky Mountain Gas leases in the area contain pooling clauses.
8. Efforts have been made to obtain the voluntary pooling of all interests. A.F.E.’s have been furnished to nonconsenting interests on April 12, 2002 and consent has not been given.
9. An order of the Commission pooling all interests in said drilling unit is necessary in order to afford each owner of interests in each said drilling unit the opportunity to recover and receive his/her just and equitable share of the oil and/or gas from the common source of supply underlying said drilling unit.
10. Production obtained from said drilling unit should be allocated to each tract therein on the basis of the proportion that the number of acres in each tract bears to the total number of acres within said drilling unit.
11. Rocky Mountain Gas Supply, LLC agreed to be bound by oral order of the Commission.
12. Based on the facts stated in the verified application and having been heard by the Hearing Officer who recommended approval, the Commission should enter an order to pool all nonconsenting owners in the 160-acre drilling and spacing unit consisting of the SW¼ of Section 33, Township 28 South, Range 69 West, 6th P.M. for the production of gas (including CO2) and associated hydrocarbons from the Dakota and Entrada Formations.
NOW, THEREFORE IT IS 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 unit consisting of the SW¼ of Section 33, Township 28 South, Range 69 West, 6th P.M. are hereby pooled for the development of gas (including CO2) and associated hydrocarbons from the Dakota and Entrada Formations.
2. The production obtained from each 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 each drilling unit; each owner of an interest in each drilling unit shall be entitled to receive his/her share of the production of the well located on each drilling unit applicable to his interest in each drilling unit.
3. Said owners are 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 units shall furnish all 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.
6. Rocky Mountain Gas Supply, LLC shall be designated as the operator for the
160-acre drilling and spacing unit consisting of the SW¼ of Section 33, Township 28 South, Range 69 West, 6th P.M. for the development of gas (including CO2) and associated hydrocarbons from the Dakota and Entrada Formations.
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 day of June 2002, as of June 4, 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
June 7, 2002