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. 190300244
TYPE: EXCEPTION LOCATION
ORDER NO. 531-65 |
REPORT OF THE COMMISSION
The Commission heard this matter on March 11, 2019, at the Ralph L. Carr Colorado Judicial Center, 1300 Broadway, First Floor, Denver, Colorado, upon application for an order amending the boundaries of the drilling and spacing unit established by Commission Order No. 535-51 to be composed of only the E½ of Section 16 and the E½ of Section 21, Township 7 North, Range 80 West, 6th P.M., and approving a total of 16 horizontal wells in the amended drilling and spacing 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 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. The Sections 4, 9, 16, and 21, Township 7 North, Range 80 West, 6th P.M., as described below, 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 approximate 640-acre drilling and spacing units and authorized one horizontal well, with the option of a second horizontal well in each drilling and spacing unit, for the Niobrara Formation underlying certain lands in Townships 6 and 7 North, Ranges 80 and 81 West, 6P.M. Originally, Order No. 531-2 applied to Sections 4, 9, 16, and 21, Township 7 North, Range 80 West, 6th P.M. It has since been extensively modified and amended. Within Sections 4, 9, 16, and 21, Township 7 North, Range 80 West, 6th P.M., the only drilling and spacing unit established by Order No. 531-2 (as defined below) that still exists covers Section 9, Township 7 North, Range 80 West, 6th P.M.
6. On July 29, 2013, the Commission entered Order No. 531-4, which, among other things, 1) vacated the 640-acre drilling and spacing unit established by Order No. 531-2 for Section 4, Township 7 North, Range 80 West, 6th P.M., and 2) established an approximate 1,267.58-acre drilling and spacing unit for Sections 4 and 5, Township 7 North, Range 80 West, 6th P.M. This drilling and spacing unit was subsequently amended by Order Nos. 531-31 and 531-35, and eventually vacated by Order 531-51.
7. On May 18, 2015, the Commission entered Order No. 531-18 which, among other things, modified various drilling and spacing unit boundary and interwell setbacks for horizontal Niobrara Formation wells and approved up to four horizontal wells within the drilling and spacing unit established by Order No. 531-2 for the Niobrara Formation underlying Section 9, Township 7 North, Range 80 West, 6th P.M.
8. On March 7, 2016, the Commission entered Order No. 531-23 which, among other things, (1) vacated the 640-acre drilling and spacing units established by Order No. 531-2 for the Niobrara Formation underlying Sections 16 and 21, Township 7 North, Range 80 West, 6th P.M., and (2) established a new approximate 1,280-acre drilling and spacing unit for the Niobrara Formation underlying Sections 16 and 21, Township 7 North, Range 80 West, 6th P.M. This drilling and spacing unit was subsequently amended by Order No. 531-38 and eventually vacated by Order 531-51.
9. On June 6, 2016, the Commission entered Order No. 531-29 which, among other, authorized the drilling of four more horizontal wells, for a total of eight horizontal wells, in the drilling and spacing unit established by Order No. 531-2 for the Niobrara Formation underlying Section 9, Township 7 North, Range 80 West, 6th P.M.
10. On June 6, 2016, the Commission entered Order No. 531-31 which, among other things, authorized 9 additional horizontal wells, for a total of 16 horizontal wells, in the approximate 1,267.58-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. As noted above, this drilling and spacing unit was also amended by Order No. 531-35 and eventually vacated by Order 531-51.
11. On August 29, 2016, the Commission entered Order No. 531-35 which, among other things, modified the setbacks in the approximate 1,267.58-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. As noted above, this drilling and spacing unit was eventually vacated by Order 531-51.
12. On August 29, 2016, the Commission entered Order No. 531-37 which, among other things, modified the setbacks for the approximate 640-acre drilling and spacing unit established by Order No. 531-2 for Section 9, Township 7 North, Range 80 West, 6th P.M., such that the productive intervals of any wellbore shall be no closer than 100 feet from the northern and southern boundaries of the drilling and spacing unit.
13. On October 30, 2018, the Commission entered Order No. 531-51 which, among other things:
a. Vacated approximate 640-acre drilling and spacing units established by Order No. 531-2 for the Niobrara Formation underlying Sections 4 and 16, Township 7 North, Range 80 West, 6th P.M.;
b. Vacated an approximate 1,257.58-acre drilling and spacing unit established by Order No. 531-4 for the Niobrara Formation underlying Sections 4 and 5, Township 7 North, Range 80 West, 6th P.M.;
c. Vacated an approximate 1,280-acre drilling and spacing unit established by Order No. 531-23 for the Niobrara Formation underlying Sections 16 and 21, Township 7 North, Range 80 West, 6th P.M.;
d. Amended Order No. 531-2 to provide that (1) the drilling and spacing unit established for Section 9, Township 7 North, Range 80 West, 6th P.M., is applicable only to the Gregory 0780 1-9H Well (API No. 05-057-05539); (2) no additional wells shall be drilled in the drilling and spacing unit established by Order No. 531-2 for the Niobrara Formation underlying Section 9, Township 7 North, Range 80 West, 6th P.M.; (3) the Gregory 0780 1-9H Well shall continue paying to the approximate 640-acre drilling and spacing unit created by Order No. 531-2 for Section 9, Township 7 North, Range 80 West, 6th P.M.; and (4) upon plugging and abandoning the Gregory 0780 1-9H Well, the approximate 640-acre drilling and spacing unit established by Order No. 531-2 for Section 9, Township 7 North, Range 80 West, 6th P.M. shall be deemed vacated;
e. Established an approximate 1,282.39-acre drilling and spacing unit for the Niobrara Formation underlying portions of Sections 4, 9, 16, and 21, Township 7 North, Range 80 West, 6th P.M., and approved a total of up to eight horizontal wells within the drilling and spacing unit;
f. Provided that the productive interval of each wellbore shall be no closer than 100 feet from the north and south unit boundaries, and no closer than 300 feet from the east and west unit boundaries, but, 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 treated interval of any wellbore in the Application Lands abutting such adjacent parcel shall be located no closer than 205 feet from the unit boundary abutting such parcel, unless the Director grants an exception.
14. On January 10, 2019, amended January 30, 2019, SandRidge, by its attorneys, filed with the Commission a verified application (“Application”) for an order amending a drilling and spacing unit established by Order No. 535-51 for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation underlying the following described lands:
Township 7 North, Range 80 West, 6th P.M.
Section 4: E½
Section 9: E½
Section 16: E½
Section 21: E½
1282.39 acres, more or less, Jackson County, Colorado (hereinafter, the “Application Lands”).
In its Application SandRidge requested that the Commission enter an order amending the spacing unit established by Order No. 535-51 for the Niobrara Formation underlying the Application Lands to be composed of only the following lands:
Township 7 North, Range 80 West, 6th P.M.
Section 16: E½
Section 21: E½
640 acres, more or less, (hereinafter, the “Amended Lands”).
Additionally, SandRidge requested that the Commission enter an order authorizing an additional 8 horizontal wells, for a total of 16 horizontal wells, within the spacing unit covering the Amended Lands, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation. The Application also stated that all horizontal wells will be drilled in a north/south orientation from no more than two multi-well pads located on the surface of the unit, or on adjacent lands with consent of the landowner, unless the Director grants an exception. Finally, the Application stated that Sandridge was not seeking to modify the setbacks established by Order No. 535-51.
15. On February 15, 2019, 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.
16. Testimony and exhibits submitted in support of the Application by Doug Sandridge, Consulting Landman for SandRidge showed that SandRidge is an owner in the Application Lands and has a right to drill in the Application Lands.
17. Geology testimony and exhibits submitted in support of the Application by Scott Cherry, Geologist for SandRidge, showed that the thickness of the Niobrara Formation underlying the Application Lands ranges from approximately 420 to 430 feet thick. Further, the geologic testimony showed that the Niobrara Formation is a sequence of chalks, marls, and calcareous shales, and is a common source of supply.
18. Engineering testimony and exhibits submitted in support of the Application by Gene M. Mask, Reservoir Engineer for SandRidge, showed that drilling and completing horizontal wells within the Niobrara Formation underlying the Application Lands is an efficient and economic method of developing the resource. The engineering testimony also showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 40.26 acres, and an approximate 1280-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by 16 horizontal wells producing oil, gas and associated hydrocarbons from the Niobrara Formation.
19. The engineering testimony concluded that, based upon microseismic data, the productive interval of any well within the Application Lands should be no less than 100 feet from the northern and southern boundaries of the drilling and spacing unit, no less than 300 feet from the eastern and western boundaries of the drilling and spacing unit, and no less than 150 feet from the productive interval of another well producing from the Niobrara Formation, 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 Amended Lands, then the treated interval of any wellbore in the Application Amended Lands abutting such adjacent parcel shall be located no closer than 205 feet from the boundary abutting such parcel, unless the Director grants an exception.
20. 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.
21. Applicant agrees to be bound by oral order of the Commission.
22. 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 amending the boundaries of the drilling and spacing unit established by Commission Order No. 535-51 to be composed of only the E½ of Section 16 and the E½ of Section 21, Township 7 North, Range 80 West, 6th P.M., and approving a total of 16 horizontal wells within this amended drilling and spacing unit, for the production of oil, gas and associated hydrocarbons from Niobrara Formation.
ORDER
IT IS HEREBY ORDERED:
1. Order No. 531-51 is hereby amended such that the established drilling and spacing unit shall consist of only the below-described lands, and a total of 16 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 16: E½
Section 21: E½
2. The productive interval of any permitted well shall be located no less than 100 feet from the northern and southern boundaries of the drilling and spacing unit, no less than 300 feet from the eastern and western boundaries of the drilling and spacing unit, and no less than 150 feet from the productive interval of another well producing from the Niobrara Formation, 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 Amended Lands, then the treated interval of any wellbore in the Application Amended Lands abutting such adjacent parcel shall be located no closer than 205 feet from the boundary abutting such parcel, unless the Director grants an exception.
3. Any horizontal wells to be drilled shall 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 the Director grants an exception.
4. All horizontal wells shall 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 26th day of March, 2019, as of March 11, 2019.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Mimi C. Larsen, Secretary