BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
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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. 170900628
TYPE: SPACING
ORDER NO. 531-59 |
REPORT OF THE COMMISSION
The Commission heard this matter on July 30, 2018, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to: 1) vacate Order No. 531-4 which, among other things, created an approximate 1267.58-acre drilling and spacing unit for Sections 4 and 5, Township 7 North, Range 80 West, 6th P.M.; 2) amend Order No. 531-12 to limit its applicability to the Grizzly 3-32H Well; and 3) establish an approximate 1,266.24-acre drilling and spacing unit for Section 5, Township 7 North, Range 80 West, 6th P.M. and Section 32, Township 8 North, Range 80 West, 6th P.M., and approve up to eight horizontal wells within the unit, 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 Rules and Regulations of the Oil and Gas Conservation Commission requires that, on unspaced lands, 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. Section 5, Township 7 North, Range 80 West, 6th P.M. and Section 32, Township 8 North, Range 80 West, 6th P.M. are subject to this Rule for the Niobrara Formation.
5. On July 15, 2008, the Commission entered Order No. 531-2, which, among other things, established multiple approximate 640-acre drilling and spacing units and approved one horizontal well in each unit for certain lands in Townships 6 and 7 North, Ranges 80 and 81 West, 6th P.M., with the option to drill a second horizontal well, with a bottom hole location no closer than 600 feet from the boundaries of the unit, for production of gas and associated hydrocarbons from the Niobrara Formation. Section 5, Township 7 North, Range 80 West, 6th P.M. is subject to this Order.
6. On July 29, 2013, the Commission entered Order No. 531-4, which, among other things, established an approximate 1267.58-acre drilling and spacing unit for Sections 4 and 5, Township 7 North, Range 80 West, 6th P.M., and approved up to seven wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the wellbore to be located no closer than 600 feet from the unit boundaries and no closer than 150 feet from the treated interval of any other wellbore located in the unit.
7. On June 17, 2014, the Commission entered Order No. 531-12, which, among other things, established an approximate 640-acre drilling and spacing unit for the Section 32, Township 8 North, Range 80 West, 6th P.M., for the Niobrara Formation, approved up to one horizontal well within the unit, and pooled all interests within the unit established for said Section 32, for the development and operation of the Niobrara Formation, and subject all nonconsenting parties to cost recovery for the drilling of the well.
8. On July 28, 2014, the Commission entered Order No. 531-17, which, among other things, approved two additional horizontal wells, for a total of up to three horizontal wells, within an approximate 640-acre drilling and spacing unit established by Order No. 531-12 for Section 32, Township 8 North, Range 80 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.
9. On May 18, 2015, the Commission entered Order No. 531-18, which, among other things, modified various orders to allow 300 foot setbacks as to the unit boundaries of the drilling and spacing units established and/or modified by such orders, for the production of the oil, gas, and associated hydrocarbons from the Niobrara and Frontier Formations, modified various orders to allow for 150 foot interwell setbacks, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, approved up to four horizontal wells within all approximate 480-acre and 640-acre drilling and spacing units established by various orders for the production of oil, gas and associated hydrocarbons from the Niobrara Formation. Section 5, Township 7 North, Range 80 West, 6th P.M., and Section 32, Township 8 North, Range 80 West, 6th P.M., are subject to this Order.
10. On June 6, 2016, the Commission entered Order No. 531-31, which, among other things, approved the drilling of nine additional horizontal wells, for a total of sixteen horizontal wells, on the approximate 1267.58-acre drilling and spacing unit for Sections 4 and 5, Township 7 North, Range 80 West, 6th P.M., established by Order No. 531-4 for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.
11. On August 29, 2016, the Commission entered Order No. 531-35, which, among other things, modified the setbacks in Order No. 531-18 to provide that the productive intervals of any wellbore shall be no closer than 100 feet from the northern and southern boundaries of the approximate 1280-acre drilling and spacing unit established by Order No. 531-4 for Sections 4 and 5, Township 7 North, Range 80 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.
12. On July 14, 2017, SandRidge, by its attorneys, filed with the Commission a verified application (“Application”) for an order to: 1) vacate Order No. 531-4 which, among other things, created an approximate 1267.58-acre drilling and spacing unit for Sections 4 and 5, Township 7 North, Range 80 West, 6th P.M.; 2) amend Order No. 531-12 to limit its applicability to the Grizzly 3-32H Well (API No. 05-057-06523); and 3) establish an approximate 1,266.24-acre drilling and spacing unit for following described lands (“Application Lands”), and 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 no closer than 100 feet from the north and south unit boundaries, no closer than 300 feet from the east and west unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, unless the Director grants an exception:
Township 7 North, Range 80 West, 6th P.M.
Section 5: All
Township 8 North, Range 80 West, 6th P.M.
Section 32: All
Applicant stated that any horizontal wells to be drilled under this Application will be drilled from no more than two multi-well pads on the surface of the drilling unit, or on adjacent lands with consent of the landowner, unless an exception is granted by the Director. Applicant also stated that all horizontal wellbores in the unit will be drilled in a north-south orientation.
13. On September 6, 2017, the Bureau of Land Management (BLM) filed a protest of the Application. On October 5, 2017, the BLM withdrew the protest on the condition that the Commission include in its order the following setbacks: “The heel and toe setbacks are 100 feet unless at the time the well is drilled the adjacent lands have not been approved for reciprocal 100-foot setbacks, in which case the heel and toe setbacks are 205 feet from any boundary of the unit abutting lands that do not have 100-foot setbacks approved.”
14. On August 21, 2017, 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.
15. Land testimony and exhibits submitted in support of the Application by Richard Silman, Senior Landman for SandRidge showed that SandRidge holds oil and gas interests and has a right to drill in the Application Lands.
16. 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 485 feet thick, and consists of a sequence of chalks, marls, and limestones.
17. Engineering testimony and exhibits submitted in support of the Application by Wesley K. McAlister, Reservoir Engineer for SandRidge, showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 40.26 acres, and an approximate 1,266.24-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.
18. 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.
19. SandRidge agreed to be bound by oral order of the Commission.
20. Based on the facts stated in the verified Application, all protests 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 Order No. 531-4 which, among other things, created an approximate 1267.58-acre drilling and spacing unit for Sections 4 and 5, Township 7 North, Range 80 West, 6th P.M.; 2) amend Order No. 531-12 to limit its applicability to the Grizzly 3-32H Well; and 3) establish an approximate 1,266.24-acre drilling and spacing unit for Section 5, Township 7 North, Range 80 West, 6th P.M. and Section 32, Township 8 North, Range 80 West, 6th P.M., and approve up to eight horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.
ORDER
IT IS HEREBY ORDERED:
1. Order No. 531-4 which, among other things, created an approximate 1267.58-acre drilling and spacing unit for Sections 4 and 5, Township 7 North, Range 80 West, 6th P.M., is hereby vacated.
2. Order No. 531-12 is hereby amended to provide that it is applicable only to the Grizzly 3-32H Well (API No. 05-057-06523). No further wells shall be drilled in the approximate 640-acre drilling and spacing unit created and pooled by Order No. 531-12 for Section 32, Township 8 North, Range 80 West, 6th P.M. The Grizzly 3-32H Well (API No. 05-057-06523) shall continue to pay to the approximate 640-acre drilling and spacing unit created and pooled by Order No. 531-12 for Section 32, Township 8 North, Range 80 West, 6th P.M. Upon the plugging and abandonment of the Grizzly 3-32H Well (API No. 05-057-06523), the approximate 640-acre drilling and spacing unit established by Order No. 531-12 shall be vacated.
3. An approximate 1,266.24-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 80 West, 6th P.M.
Section 5: All
Township 8 North, Range 80 West, 6th P.M.
Section 32: All
4. The productive interval of the wellbore will be located no closer than 100 feet from the north and south unit boundaries, no closer than 300 feet from the east and west unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, unless the Director grants an exception. Notwithstanding the foregoing, if the Commission has not at the time of the drilling permit application established reciprocal setbacks for a parcel adjacent to the north or south of the Application Lands, then the productive interval of any wellbore in the unit abutting such adjacent parcel will be located no closer than 205 feet from the unit boundary abutting such adjacent parcel, unless the Director grants an exception.
5. All wells permitted under this Order will be drilled from no more than two multi-well pads within the Application Lands, or on adjacent lands with surface owner consent, unless the Director grants an exception.
6. All wells permitted under this Order will be drilled in a north-south orientation.
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 20th day of August, 2018, as of July 30, 2018.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By__________________________________
Julie Spence Prine, Secretary