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 FOR THE NIOBRARA FORMATION, UNNAMED FIELD, JACKSON COUNTY, COLORADO

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CAUSE NO. 531

 

DOCKET NO. 161000457

 

TYPE: SPACING

 

ORDER NO. 531-43

 

REPORT OF THE COMMISSION

 

        The Commission heard this matter on October 24, 2016, at the Northeastern Junior College, Hayes Student Center Ballroom, 100 College Avenue, Sterling, Colorado, upon application for an order to: 1) vacate an approximate 640-acre drilling and spacing unit established by Order No. 531-2 for Section 1, Township 7 North, Range 81 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; 2) vacate an approximate 640-acre drilling and spacing unit established by Order No. 531-18 for Section 36, Township 8 North, Range 81 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation;  and 3) establish an approximate 1,280-acre drilling and spacing unit for Section 1, Township 7 North, Range 81 West, 6th P.M., and Section 36, Township 8 North, Range 81 West, 6th P.M., and approve the drilling of up to eight horizontal wells within the proposed unit, for 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.         On July 15, 2008, the Commission entered Order No. 531-2 which, among other things, established approximate 640-acre drilling and spacing units for certain lands, including Section 1, Township 7 North, Range 81 West, 6th P.M., and approved one horizontal well within each unit, with the option to drill a second horizontal well within each unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.

 

5.         May 18, 2015, the Commission entered Order No. 531-18 which, among other things, established 640-acre drilling and spacing units for certain lands, including Section 36, Township 8 North, Range 81 West, 6th P.M., and approved four horizontal well for each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

 

6.         On August 25, 2016, SandRidge, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to: 1) vacate an approximate 640-acre drilling and spacing unit established by Order No. 531-2 for Section 1, Township 7 North, Range 81 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; 2) vacate an approximate 640-acre drilling and spacing unit established by Order No. 531-18 for Section 36, Township 8 North, Range 81 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation;  and 3)  establish an approximate 1,280-acre drilling and spacing unit for the below-described lands (“Application Lands”) and to approve up to eight horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the productive interval of the wellbore to be located not less than than 100 feet from the northern and southern boundaries and not less than 300 feet from the eastern and western unit boundaries, and not less than 150 feet from the treated interval of any well being drilled or producing from the Niobrara Formation, without exception being granted by the Director:

 

Township 7 North, Range 81 West, 6th P.M.

Section 1:        All

 

Township 8 North, Range 81 West, 6th P.M.

Section 36:      All

 

7.         On October 3, 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.

 

8.         On October 19, 2016, the BLM filed a protest. 

 

9.         The protest was withdrawn on October 20, 2016.  The withdrawal of the protest was conditioned upon the order containing a provision that the productive interval of each wellbore shall be no closer than 100 feet from the northern and southern unit boundaries and not less than 300 feet from the eastern and western unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, provided that if the Commission has not at the time of the drilling permit application granted to the owners of the adjacent or cornering lands the right to locate the treated interval of the wellbore no closer than 100 feet from the northern and southern boundaries of the unit, then the treated interval of the wellbore shall be located no closer than 215 feet from the northern and southern boundaries of the unit, unless the Director grants an exception.

 

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

 

11.       Geologic testimony and exhibits submitted in support of the Application by Scott Cherry, Geologist for SandRidge, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 450 to 480 feet thick, and is generally of uniform thickness throughout the Application Lands.

 

12.       Engineering testimony and exhibits submitted in support of the Application by Wesley McAlister, Reservoir Engineer for SandRidge, showed that the drainage area for analog horizontal Niobrara Formation wells are estimated at 40.26 acres, and an approximate 1,280-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by a horizontal well producing oil, gas and associated hydrocarbons from the Niobrara Formation.

 

13.       Applicant stated that the proposed wells would be located on no more than four multi-well pads, unless the Director grants an exception.

 

14.       This drilling and spacing unit contains Colorado State Board of Land Commissioners (State Land Board) leased and/or unleased minerals.  A Communitization Agreement with the State Land Board will be required for all wells drilled under the terms of this order.  A Communitization Agreement must be obtained prior to drilling operations that access any State Land Board minerals.

 

            15.       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.

 

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

 

17.     Based on the facts stated in the verified Application, the protest having been withdrawn, and based on the Hearing Officer review of the Application under Rule 511, the Commission should enter an order to: 1) vacate an approximate 640-acre drilling and spacing unit established by Order No. 531-2 for Section 1, Township 7 North, Range 81 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; 2) vacate an approximate 640-acre drilling and spacing unit established by Order No. 531-18 for Section 36, Township 8 North, Range 81 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation;  and 3) establish an approximate 1,280-acre drilling and spacing unit for Section 1, Township 7 North, Range 81 West, 6th P.M., and Section 36, Township 8 North, Range 81 West, 6th P.M., and approve the drilling of up to eight horizontal wells within the proposed unit, for production of oil, gas and associated hydrocarbons from the Niobrara Formation.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.         An approximate 640-acre drilling and spacing unit established by Order No. 531-2 for Section 1, Township 7 North, Range 81 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation is hereby vacated.

 

2.         An approximate 640-acre drilling and spacing unit established by Order No. 531-18 for Section 36, Township 8 North, Range 81 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation is hereby vacated.

 

3.      An approximate 1,280-acre drilling and spacing unit for the below-described lands, is hereby established, and a total of up to eight horizontal wells within the unit are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation:

 

 

Township 7 North, Range 81 West, 6th P.M.

Section 1:        All

 

Township 8 North, Range 81 West, 6th P.M.

Section 36:      All

 

4.         The productive interval of each wellbore shall be no closer than 100 feet from the northern and southern unit boundaries and not less than 300 feet from the eastern and western unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, provided that if the Commission has not at the time of the drilling permit application granted to the owners of the adjacent or cornering lands the right to locate the treated interval of the wellbore no closer than 100 feet from the northern and southern boundaries of the unit, then the treated interval of the wellbore shall be located no closer than 215 feet from the northern and southern boundaries of the unit, unless the Director grants an exception.

 

5.         Any new horizontal wells shall be drilled in a north-south orientation.

 

6.         The proposed wells shall be located on no more than four multi-well pads, unless the Director grants an exception.

 

6.         Sandridge shall submit a Communitization Agreement to the Colorado State Land Board prior to drilling operations that access any State Land Board minerals. 

 

 

 

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 35 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 8th day of November, 2016, as of October 24, 2016.         

 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By__________________________________

Julie Murphy, Secretary