BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO

IN THE MATTER OF PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE NIOBRARA FORMATION, UNNAMED FIELD, JACKSON COUNTY, COLORADO

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CAUSE NO. 531 DOCKET NO. 160400166 TYPE: EXCEPTION LOCATION ORDER NO. 531-26

REPORT OF THE COMMISSION

The Commission heard this matter on April 18, 2016, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to modify Order No. 531-18 and allow 100 foot setbacks as to the north and south unit boundaries of Section 6, Township 7 North, Range 80 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

FINDINGS

The Commission finds as follows:

1.         SandRidge Exploration & Production LLC, Operator No. 10598 (“SandRidge” or “Applicant”) 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 Commission Rules provides a well to be drilled 2,500 feet or greater shall be located not less than 600 feet from any lease line, and shall be located not less than 1,200 feet from any other producible oil or gas well when drilling to the same common source of supply, unless authorized by the Commission upon hearing.

5.         On July 15, 2008, the Commission entered Order No. 531-2 which, among other things, established an approximate 640-acre drilling and spacing unit for the Section 6, Township 7 North, Range 80 West, 6^th P.M., for the production of oil and associated hydrocarbons from the Niobrara Formation and approved the drilling and completion of one horizontal well, with the option to drill a second horizontal well, within the unit for the production of oil and associated hydrocarbons from the Niobrara Formation, with the initial penetration of the Niobrara Formation and an ultimate bottomhole location no closer than 600 feet from the boundaries of the drilling and spacing unit.

6.         On May 18, 2015, the Commission entered Order No. 531-18 which, among other things, modified Order No. 531-2 to allow the productive interval of any horizontal well to be no closer than 300 feet from the unit boundary for the production of the oil, gas, and associated hydrocarbons from the Niobrara Formation; modified Order No. 531-2 to allow the productive interval of any horizontal well to be no closer than 150 feet from the productive interval of another horizontal well producing from the Niobrara Formation; and approved up to four (4) horizontal wells within each 640-acre drilling and spacing unit established by Order No. 531-2 for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

7.         On March 7, 2016, the Commission entered Order No. 531-24 which, among other things, authorized an additional four (4) horizontal wells, for a total of eight (8) horizontal wells, within the existing drilling and spacing unit established by Order No. 531-2 for the Application Lands, for production from the Niobrara Formation.

8.         On February 18, 2016, SandRidge, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116 C.R.S., for an order modifying the setbacks established by Order No. 531-18 such that the productive interval of any permitted well within the approximate 640-acre existing drilling and spacing unit established by Order No. 531-2 for the below-described lands, (“Application Lands”) shall be no more than 100 feet from the northern or southern boundaries of the unit for the production of the oil, gas, and associated hydrocarbons from the Niobrara Formation, without exception being granted by the Director: 

Township 7 North, Range 80 West, 6^th P.M.
Section 6:  Lots 1-7, SE¼NW¼, E½SW¼, S½NE¼, SE¼

8.         On March 28, 2016, SandRidge, by its attorneys, filed with the Commission a written request to approve the Application based on the merits of the verified Application and the supporting exhibits.  Sworn written testimony and exhibits were submitted in support of the Application.

9.         Land testimony and exhibits submitted in support of the Application by Richard Silman, Landman for SandRidge, showed that SandRidge holds oil and gas leasehold interests and has a right to drill in the Application Lands.

10.       Geologic testimony and exhibits submitted in support of the Application by Scott Cherry, Geologist for SandRidge, showed the Niobrara Formation is present throughout the Application Lands, is approximately 490 to 505 feet thick, and is generally of uniform thickness throughout the Application Lands.

11.       Engineering testimony and exhibits submitted in support of the Application by Earuch F. Broacha, Rockies Division Subsurface Manager for SandRidge, demonstrated that drainage and fractures will be perpendicular to a north-south wellbore of a well drilled in the Niobrara Formation and parallel to the north and south unit boundaries, that there is virtually no drainage from the toe and heel of the well from the direction of the north and south unit boundaries, that the current setback of 300 feet from the unit boundaries at the toe and heel of a well drilled in the Niobrara Formation has a high probability of leaving uncovered reserves in the ground, and that the requested setbacks of 100 feet from the north and south unit boundaries of the Application Lands for wells drilled in a north-south direction will promote efficient drainage, protect correlative rights, and prevent waste.

12.       The above-referenced testimony and exhibits show that granting the Application will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of hydrocarbons, and will not violate correlative rights.

13.       SandRidge agreed to be bound by oral order of the Commission. 

14.       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 modify Order No. 531-18 and allow 100 foot setbacks from the north and south unit boundaries of Section 6, Township 7 North, Range 80 West, 6^th P.M., for wells drilled in a north-south direction for the production of the oil, gas, and associated hydrocarbons from the Niobrara Formation.

ORDER

IT IS HEREBY ORDERED:

1.         Order No. 531-18 is hereby modified to provide that the productive interval of any permitted well drilled in a north-south direction shall be no closer than 100 feet from the north and south unit boundaries of the approximate 640-acre drilling and spacing unit established  for the below-described lands for the production of the oil, gas, and associated hydrocarbons from the Niobrara Formation, unless the Director grants an exception:

Township 7 North, Range 80 West, 6^th P.M.
Section 6:  Lots 1-7, SE¼NW¼, E½SW¼, S½NE¼, SE¼

IT IS FURTHER ORDERED:

1.         The provisions contained in the above order shall become effective immediately.

2.         The Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.

3.         Under the State Administrative Procedure Act the Commission considers this Order to be final agency action for purposes of judicial review within 30 days after the date this Order is mailed by the Commission.

4.         An application for reconsideration by the Commission of this Order is not required prior to the filing for judicial review.

ENTERED this 29th day of April, 2016, as of April 18, 2016.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By: ____________________________________     

                 Julie Murphy, Secretary