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 IN THE SULPHUR CREEK FIELD, RIO BLANCO COUNTY, COLORADO

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CAUSE NO. 527

 

ORDER NO. 527-6

 

 

REPORT OF THE COMMISSION

 

This cause came on for hearing before the Commission at 9:00 a.m. on January 11, 2010, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to allow the equivalent of one well per 10 acres for certain lands in Townships 2 and 3 South, Range 97 West, 6th P.M., Townships 1 through 4 South, Range 98 West, 6th P.M., and Townships 2 and 3 South, Range 99 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations, with the permitted well to be located no closer than 100 feet from any leaseline adjacent to the application lands.

 

FINDINGS

 

The Commission finds as follows:

 

1.     Williams Production RMT Company (“Williams”), 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.     Rule 318.a. of the Rules and Regulations of the Oil and Gas Conservation Commission requires that wells drilled in excess of 2,500 feet in depth be located not less than 600 feet from any lease line, and located not less than 1,200 feet from any other producible or drilling oil or gas well when drilling to the same common source of supply.  Townships 2 and 3 South, Range 97 West, 6th P.M. and Townships 1 through 4 South, Range 98 West, 6th P.M. and Townships 2 and 3 South, Range 99 West, 6th P.M. are subject to this Rule for the Williams Fork and Iles Formations.

 

5.     On October 2, 2009, Williams, by its attorney, filed a verified application for an order to allow the equivalent of one well per 10 acres to be drilled into and produced from the Williams Fork and Iles Formations (including the Sego member of the Iles Formation) for the below-listed lands:

                                                             

Township 1 South, Range 98 West, 6th P.M.

Section 36:    Lots 1, 8 and 9

 

Township 2 South, Range 97 West, 6th P.M.

Section 32:    Lots 1 through 8 (S½)

 

Township 2 South, Range 98 West, 6th P.M.

Section 12:    Lots 11 through 20, N½ SW¼, S½ NW¼, SW¼ NE¼, and NE¼ NW¼ (All)

Section 14:    Lots 1 through 8 and S½ (All)

 

Township 2 South, Range 99 West, 6th P.M.

Section 22:    S½

Section 23:    S½

Section 25:    S½ NW¼, SE¼ NE¼, NW¼ SW¼, S½ S½, and NE¼ SE¼

Section 26:    NW¼ NE¼, N½ NW¼, S½ N½, and S½

Section 27:    All

Section 34:    All

Section 36:    SE¼

 

Township 3 South, Range 97 West, 6th P.M.

Section 4:      Lots 5 through 7, SE¼ NW¼, N½ SW¼, and SW¼ SW¼

Section 5:      Lots 5 through16 and SE¼ (All)

Section 7:      Lots 1 through 4, E½ W½, and E½ (All)

Section 8:      N½, N½ S½, S½ SW¼, and SW¼ SE¼

Section 16:    All

Section 17:    W½, W½ NE¼, and SE¼ SE¼

Section 18:    Lots 1 and 2 and E½ NW¼

 

Township 3 South, Range 98 West, 6th P.M.

Section 13:    W½ SW¼, NE¼ SW¼, and W½ SE¼

Section 35:    SE¼

 

Township 3 South, Range 99 West, 6th P.M.

Section 1:      Lots 1 through 4 and S½ N½

Section 2:      S½ NE¼ and E½ SE¼

Section 3:      E½ SE¼

Section 13:    N½ and SW¼

Section 14:    All

Section 23:    All

Section 25:    N½  

Section 26:    N½ N½

Section 27:    N½ 

 

Township 4 South, Range 98 West, 6th P.M.

Section 3:      Lots 1 through 3, S½ NE¼, SE¼ NW¼, and S½

Section 4:      Lots 1 through 3, S½ N½, and S½

Section 5:      Lots 1 through 4, S½ N½, and S½ (All)   

 

All future Williams Fork and Iles Formation wells drilled under this application should be optionally drilled upon a 10-acre density basis with each such well to be located downhole anywhere upon such lands provided no such wells shall be located downhole any closer than 100 feet from a lease line or from the outside boundary of the application lands unless such outside 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 Williams Fork wells in which event Williams Fork and Iles Formation wells to be drilled upon the application lands should be drilled downhole no closer than 200 feet from that portion of the application lands boundary which so abuts or corners the lands in respect of which 10-acre density downhole drilling for Williams Fork Formation wells has not been ordered by the Commission. 

Except as previously authorized by order of the Commission, wells to be drilled under this application should be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section (or lots or parcels approximately equivalent thereto), unless exception is granted by the Director of the Colorado Oil and Gas Conservation Commission pursuant to application made for such exception as set forth by Rule 318.c.

 

6.     On November 17, 2009, Williams, by its attorney, filed with the Commission a written request to approve the application based on the merits of the verified application and the supporting exhibits as is provided for by Rule 511.  Sworn written testimony and exhibits were submitted in support of the application.

 

7.     On November 30, 2009, the Hearing Officer continued the matter to allow for consultation with the Colorado Division of Wildlife (“DOW”), under Rule 306.c.(1)B., and the Colorado Department of Public Health and Environment (“CDPHE”), under Rule 306.d.(1)B., which is required when the operator requests the modification of an existing Commission order to increase well density to more than one well per 40 acres.  After having received adequate notice, both the DOW and the CDPHE indicated they did not have comments in this matter.

 

8.     Testimony and exhibits submitted in support of the application showed that Williams is a leasehold owner of the application lands, and that the mineral interest underlying the application lands is entirely federal while a majority of the surface estate is federal.  Additional testimony showed that the application lands are in the vicinity of lands which have been approved for 10-acre well density drilling for both the Williams Fork and Iles Formations under Order Nos. 527-1 and 527-4.

 

9.     Testimony and exhibits submitted in support of the application showed that the Williams Fork Formation underlying the application lands is comprised of sandstones, shales, and coals deposited in an upper to lower coastal plain setting, with said sandstones being fluvial in origin that were deposited in meandering to braided stream depositional environments   Additional testimony indicated that the productive sandstones throughout the Williams Fork Formation are laterally discontinuous and naturally fractured with microdarcy permeability and porosities ranging from 6% to 10%.  Stratigraphic cross sectional analysis of the application lands indicated that the Williams Fork and Iles Formations (including the Sego member) are present throughout, and demonstrated the poor continuity of most sandstones found therein.  The nature of the depositional environments and the associated limited extents of the individual sand channel reservoirs within the Williams Fork and Iles Formations, underlying the application lands, justify 10-acre well density, and drilling on well density greater than 10 acres will likely result in significant gas reserves being unrecovered.

 

10.   Testimony and exhibits submitted in support of the application showed that pressure testing in similarly situated wells confirm the geologic model, and, even with some pressure reduction, 10-acre density wells will produce substantial incremental gas reserves.  Additional testimony indicated that approval of 10-acre density for the Williams Fork Formation underlying the application lands will increase the fracture stimulation effectiveness of the productive sands which can be compromised if differing pressured sands are encountered during well completions.  Further testimony showed that approval of 10-acre density for lands under this application will allow for the ability to optimally place bottomhole locations that will in turn minimize well interference and maximize the ultimate recovery of gas-in-place.  Testimony indicated that the practice of commingling the Iles Formation (including the Sego member) with the Williams Fork Formation is the most efficient and economic method of developing the reservoirs. 

 

11.   The above-referenced testimony and exhibits show that granting the application and approving the 10-acre well density will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas, and will not violate correlative rights.

 

12.   Williams 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., the Commission should enter an order to allow the equivalent of one well per 10 acres for certain lands in Townships 2 and 3 South, Range 97 West, 6th P.M., Townships 1 through 4 South, Range 98 West, 6th P.M., and Townships 2 and 3 South, Range 99 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations (including the Sego member of the Iles Formation), with the permitted well to be located no closer than 100 feet from any lease line or outside boundary of the application lands adjacent to other lands approved for 10-acre density Williams Fork Formation wells.

 

ORDER

 

NOW, THEREFORE IT IS ORDERED, that the equivalent of one well per 10 acres is hereby allowed to be drilled for the below-listed lands (application lands), for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations (including the Sego member of the Iles Formation):

                                                             

Township 1 South, Range 98 West, 6th P.M.

Section 36:    Lots 1, 8 and 9

 

Township 2 South, Range 97 West, 6th P.M.

Section 32:    Lots 1 through 8 (S½)

 

Township 2 South, Range 98 West, 6th P.M.

Section 12:    Lots 11 through 20, N½ SW¼, S½ NW¼, SW¼ NE¼, and NE¼ NW¼ (All)

Section 14:    Lots 1 through 8 and S½ (All)

 

Township 2 South, Range 99 West, 6th P.M.

Section 22:    S½

Section 23:    S½

Section 25:    S½ NW¼, SE¼ NE¼, NW¼ SW¼, S½ S½, and NE¼ SE¼

Section 26:    NW¼ NE¼, N½ NW¼, S½ N½, and S½

Section 27:    All

Section 34:    All

Section 36:    SE¼

 

Township 3 South, Range 97 West, 6th P.M.

Section 4:      Lots 5 through 7, SE¼ NW¼, N½ SW¼, and SW¼ SW¼

Section 5:      Lots 5 through16 and SE¼ (All)

Section 7:      Lots 1 through 4, E½ W½, and E½ (All)

Section 8:      N½, N½ S½, S½ SW¼, and SW¼ SE¼

Section 16:    All

Section 17:    W½, W½ NE¼, and SE¼ SE¼

Section 18:    Lots 1 and 2 and E½ NW¼

 

Township 3 South, Range 98 West, 6th P.M.

Section 13:    W½ SW¼, NE¼ SW¼, and W½ SE¼

Section 35:    SE¼

 

Township 3 South, Range 99 West, 6th P.M.

Section 1:      Lots 1 through 4 and S½ N½

Section 2:      S½ NE¼ and E½ SE¼

Section 3:      E½ SE¼

Section 13:    N½ and SW¼

Section 14:    All

Section 23:    All

Section 25:    N½  

Section 26:    N½ N½

Section 27:    N½ 

 

Township 4 South, Range 98 West, 6th P.M.

Section 3:      Lots 1 through 3, S½ NE¼, SE¼ NW¼, and S½

Section 4:      Lots 1 through 3, S½ N½, and S½

Section 5:      Lots 1 through 4, S½ N½, and S½ (All)         

 

IT IS FURTHER ORDERED, that all future Williams Fork and Iles Formation wells drilled under this application shall be optionally drilled upon a 10-acre density basis with each such well to be located downhole anywhere upon such lands provided no such wells shall be located downhole any closer than 100 feet from a lease line or from the outside boundary of the application lands unless such outside 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 Williams Fork wells in which event Williams Fork and Iles Formation wells to be drilled upon the application lands shall be drilled downhole no closer than 200 feet from that portion of the application lands boundary which so abuts or corners the lands in respect of which 10-acre density downhole drilling for Williams Fork Formation wells has not been ordered by the Commission. 

Except as previously authorized by order of the Commission, wells to be drilled under this order shall be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section (or lots or parcels approximately equivalent thereto), unless exception is granted by the Director of the Colorado Oil and Gas Conservation Commission pursuant to application made for such exception as set forth by Rule 318.c.

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.

 

                        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 the filing for judicial review.

 

                        ENTERED this__________ day of February, 2010, as of January 11, 2010.

           

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By____________________________________       

                                                                                    Carol J. Harmon, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

February 8, 2009