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. 170900626
TYPE: SPACING
ORDER NO. 531-61 |
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 an approximate 640-acre drilling and spacing unit established by Order No. 531-2 for Section 6, Township 7 North, Range 80 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 31, Township 8 North, Range 80 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; and 3) establish an approximate 320.28-acre drilling and spacing unit for portions of Section 6, Township 7 North, Range 80 West, 6th P.M., and portions of Section 31, Township 8 North, Range 80 West, 6th P.M., and approve up to two horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from 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 established numerous approximate 640-acre drilling and spacing units for certain lands, including Section 6, Township 7 North, Range 80 West, 6th P.M., and approved one horizontal well within each unit 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 oil, gas, and associated hydrocarbons from the Niobrara Formation.
5. On May 18, 2015, the Commission entered Order No. 531-18, which among other things, modified the setbacks established by Order No. 531-2, established four approximate 640-acre drilling and spacing units for certain lands, including Section 31, Township 8 North, Range 80 West, 6th P.M., and approved up to four horizontal wells within each unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation. Section 31, Township 8 North, Range 80 West, 6th P.M. and Section 6, Township 7 North, Range 80 West, 6th P.M. are both subject to this Order.
6. On March 7, 2016, the Commission entered Order No. 531-24, which approved a total of up to four horizontal wells within an approximate 640-acre drilling and spacing unit established by Order No. 531-2 for Section 6, Township 7 North, Range 80 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.
7. On April 18, 2016, the Commission entered Order No. 531-26, which, among other things, modified the setbacks established by Order No. 531-18 for Section 6, Township 7 North, Range 80 West, 6th P.M. the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.
8. On June 6, 2016, the Commission entered Order No. 531-27, which approved a total of up to eight horizontal wells within an approximate 640-acre drilling and spacing unit established by Order No. 531-18 for Section 31, 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 1, 2017, the Commission entered Order No. 531-46 which, among other things, vacated Order Nos. 531-18, 531-24, 531-26, and 531-27 only as to Section 31, Township 8 North, Range 80 West, 6th P.M. and Section 6, Township 7 North, Range 80 West, 6th P.M., established an approximate 1,280-acre drilling and spacing unit for Section 31, Township 8 North, Range 80 West, 6th P.M. and Section 6, Township 7 North, Range 80 West, 6th P.M. and approved eight horizontal wells for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.
10. On July 14, 2017, SandRidge, by its attorneys, filed with the Commission 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 6, Township 7 North, Range 80 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 31, Township 8 North, Range 80 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; and 3) establish an approximate 320.28-acre drilling and spacing unit for the below-described lands (“Application Lands”) and to approve up to two 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 6: E½E½
Township 8 North, Range 80 West, 6th P.M.
Section 31: E½E½
Applicant stated that any horizontal wells to be drilled under this Application will be drilled from no more than one well pad, or on adjacent lands with surface owner consent, unless the Director grants an exception. Applicant also stated that all horizontal wells will be drilled in a north-south orientation.
11. On September 6, 2017, the Bureau of Land Management (BLM) protested 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.”
12. Applicant further stated that it has spud, but not competed, four wells within the approximate 640-acre drilling and spacing unit established by Order No. 531-2 for Section 6, Township 7 North, Range 80 West, 6th P.M. One of those four wells, the Marr 0780 7-6H Well (API No. 05-057-06497), is within the Application Lands. Applicant has affirmed that upon approval of this proposed Order, it will file a sundry with the Commission requesting that the Marr 0780 7-6H Well (API No. 05-057-06497) be made a part of the proposed 320.28-acre drilling and spacing unit established by this proposed Order for the Application Lands.
13. On August 17, 2017, supplemented July 19, 2018, 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.
14. The Application Lands contain federal minerals. As such, SandRidge agreed to submit a Communitization Agreement to the BLM for any existing wells within 90 days of the entry of an order. SandRidge also agreed to submit a Communitization Agreement to the BLM at least 90 days before the anticipated date of first production (as defined in the Commission’s Rules) from the initial well drilled within the drilling and spacing unit for the Application Lands.
15. Land testimony and exhibits submitted in support of the Application by Richard Silman, Senior Landman for SandRidge, showed that Applicant holds oil and gas leasehold 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 460 to 490 feet thick, and is comprised of a sequence of chalks, marls and limestones
17. Engineering testimony and exhibits submitted in support of the Application by Wesley McAlister, Reservoir Engineer for SandRidge, showed SandRidge plans on drilling two horizontal wells for the Niobrara Formation. Engineering testimony further showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 80.52 acres, and an approximate 320.28-acre drilling and spacing unit is therefore not less than the maximum area that can be efficiently, economically and effectively drained by two horizontal wells 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 an approximate 640-acre drilling and spacing unit established by Order No. 531-2 for Section 6, Township 7 North, Range 80 West, 6th P.M. for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; 2) establish an approximate 320.28-acre drilling and spacing unit for portions of Section 6, Township 7 North, Range 80 West, 6th P.M., and portions of Section 31, Township 8 North, Range 80 West, 6th P.M., and approve up to two horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from Niobrara Formation; 3) require that upon approval of this proposed Order, Applicant shall file a sundry with the Commission requesting that the Marr 0780 7-6H Well (API No. 05-057-06497) be made a part of the proposed 320.28-acre drilling and spacing unit established by this proposed Order for the Application Lands; and 4) require that once the Commission has made the Marr 0780 7-6H Well (API No. 05-057-06497) a part of the proposed 320.28-acre drilling and spacing unit established by this proposed Order, the Applicant shall file an application with the Commission to vacate Order No. 531-46 which, among other things, established an approximate 1,280-acre drilling and spacing unit for Section 31, Township 8 North, Range 80 West, 6th P.M. and Section 6, Township 7 North, Range 80 West, 6th P.M. for the 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 6, Township 7 North, Range 80 West, 6th P.M. for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation is hereby vacated.
2. An approximate 320.28-acre drilling and spacing unit for the below-described lands, is hereby established, and a total of up to two 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 6: E½E½
Township 8 North, Range 80 West, 6th P.M.
Section 31: E½E½
3. 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.
4. All wells permitted under this Order will be drilled from no more than one well pad within the Application Lands, or on adjacent lands with surface owner consent, unless the Director grants an exception.
5. All wells permitted under this Order will be drilled in a north-south orientation.
6. Applicant shall file a sundry with the Commission requesting that the Marr 0780 7-6H Well (API No. 05-057-06497) be made a part of the proposed 320.28-acre drilling and spacing unit established by this Order for the Application Lands.
7. Once the Commission has made the Marr 0780 7-6H Well (API No. 05-057-06497) a part of the 320.28-acre drilling and spacing unit established by this Order, the Applicant shall file an application with the Commission to vacate Order No. 531-46 which, among other things, established an approximate 1,280-acre drilling and spacing unit for Section 31, Township 8 North, Range 80 West, 6th P.M. and Section 6, Township 7 North, Range 80 West, 6th P.M. for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.
8. SandRidge shall submit a Communitization Agreement to the BLM for any existing wells within 90 days of the entry of this Order. SandRidge shall submit a Communitization Agreement to the BLM at least 90 days before the anticipated date of first production (as defined in the Commission’s Rules) from the initial well drilled within the drilling and spacing unit for the above described lands.
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 22nd day of August, 2018, as of July 30, 2018.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Julie Spence Prine, Secretary