BEFORE THE OIL AND
GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF PROMULGATION AND ) CAUSE NO. 527
ESTABLISHMENT OF FIELD RULES TO GOVERN )
OPERATIONS IN THE SULPHUR CREEK FIELD, ) ORDER NO. 527-5
RIO BLANCO COUNTY, COLORADO )
REPORT OF THE
COMMISSION
This cause came on for hearing before the Commission at 8:00 a.m. on October 2, 2007, in the Public Hearing Room, Old Court House, 544 Rood Avenue, 2nd Floor, Grand Junction, Colorado, for an order to amend the setback rules as established in Order No. 572-3 for the NEĽ NEĽ of Section 27, Township 2 South, Range 98 West, 6th P.M., for production from the Iles and Sego Formations.
FINDINGS
The Commission finds as follows:
1. Whiting Oil and Gas Corporation (“Whiting”), 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 March 26, 2007, the Commission issued Order No. 527-3, which among other things, allowed 10-acre downhole well density for the production of gas and associated hydrocarbons from the Williams Fork, Iles and Sego Formations, for certain lands including the NEĽ NEĽ of Section 27, Township 2 South, Range 98 West, 6th P.M., with the permitted well for the Williams Fork Formation to be located no closer than 100 feet from the outside boundary of the application lands and the permitted well for the Iles Formation (including the Sego member of the Iles Formation) to be located downhole no closer than 400 feet to the outside boundary.
5. On August 8, 2007, Whiting, by its attorney, filed with the Commission a verified application for an order to amend Order No. 572-3 such that permitted downhole locations for Iles Formation (including the Sego member of the Iles Formation) wells drilled in the application lands could be consistent with the allowed downhole locations for Williams Fork Formation wells drilled in the application lands. In addition, the applicant proposes that Iles Formation wells will be drilled and completed only within wellbores drilled to the Williams Fork Formation and will not be drilled as separate wells.
7. Testimony and exhibits submitted in support of the application showed that the mineral estate of the application lands are owned by the United States of America and are leased to Williams Production RMT Company (51%) and ExxonMobil Production Company (49%). Additional testimony indicated that Whiting has entered into a farmout agreement with these companies, giving it the right to drill on the application lands and earn an interest in the leasehold.
8. Testimony and exhibits submitted in support of the application showed that the Iles Formation (which includes the Sego member of the Iles Formation) generally underlies the application lands. Additional testimony and exhibits indicated that the same depositional environment as interpreted for the Mesaverde Group has also been interpreted for the Cozzette and upper Corcoran members of the Iles Formation, and for the Cameo Coal section of the Williams Fork Formation. Further testimony and exhibits indicate that the depositional environment of the Sego Sandstone is marine shoreface sandstone and offshore mudstone, the same as the Rollins and lower Corcoran members of the Iles Formation. Testimony and exhibits indicated that fluvial sandstone reservoirs are found both within the coastal plain section of the Corcoran and Cozzette members of the Iles Formation and within the entire Williams Fork Formation.
9. Testimony and exhibits submitted in support of the application indicated that the evidence submitted in support of prior applications filed with the Commission showed that wells drilled within the Iles Formation in the Piceance Basin area appeared to have small drainage areas. Additional testimony showed that Iles Formation wells drilled as stand alone wells would be uneconomic to drill and produce due to smaller recoveries of gas from only the Iles Formation. Further testimony and exhibits indicated that wells completed within the Iles Formation (which includes the Sego Member of the Iles Formation) in connection with the drilling of the Williams Fork Formation wells are economic, and therefore it is necessary to revise the setback rules applicable to the Iles Formation so that they are identical to those allowed for the Williams Fork Formation.
10. Whiting requested that the Commission take notice of the testimony and exhibits submitted in support of the application resulting in Order No. 527-4 which requested identical relaxed setback rules for the Iles Formation underlying lands which are contiguous to the application lands.
11. The above-referenced testimony and exhibits show that the proposed amended setbacks will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas, and will not violate correlative rights.
12. Whiting Oil and Gas Corporation 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 Officer review of the application under Rule 511.b., the Commission should enter an order to amend the setback rules as established in Order No. 572-3 for the NEĽ NEĽ of Section 27, Township 2 South, Range 98 West, 6th P.M., for production from the Iles and Sego Formations.
ORDER
NOW, THEREFORE, IT IS ORDERED, that, the setback rules as established in Order No. 572-3, are hereby amended for the NEĽ NEĽ of Section 27, Township 2 South, Range 98 West, 6th P.M., for production from the Iles and Sego Formations such that the permitted well shall be located downhole anywhere upon the application lands but no closer than 100 feet from the outside boundary of the application lands unless such boundary abuts or corners lands in respect of which the Commission has not at the time of the drilling permit application granted the right to drill 10-acre density wells for the Iles and Sego Formations, in which event the Iles Formation and Sego Formation wells to be drilled upon the application lands shall be drilled downhole no closer than 200 feet from that portion of the boundary which so abuts or corners the lands in respect of which 10-acre density downhole drilling for Iles Formation and Sego Formation wells has not been ordered by the Commission.
IT IS FURTHER ORDERED, that Iles Formation and Sego Formation wells shall be drilled and completed only within wellbores drilled to the Williams Fork Formation and shall not be drilled as separate wells.
IT IS FURTHER ORDERED, that, except as previously authorized by order of the Commission, wells to be drilled under this application shall be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section unless exception is granted by the Director pursuant to application made for such exception.
IT IS FURTHER ORDERED, that the provisions contained above in this order shall be effective herewith.
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.
IT IS FURTHER ORDERED, that under the State Administrative Procedure Act, the Commission considers this order to be final agency action for purposes of judicial review within thirty (30) days after the date this order is mailed by the Commission.
IT IS FURTHER ORDERED, that an application for reconsideration by the Commission of this order is not required prior to filing for judicial review.
ENTERED this__________day of October, 2007, as of October 2, 2007.
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
October 16, 2007