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 IN THE RIDGELINE FIELD, MOFFAT COUNTY, COLORADO |
) CAUSE NO. 534 ) ) |
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission at 9:00 a.m. on February 22, 2010, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to establish the following two approximate 320-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Niobrara and Mancos Formations, to allow one optional additional well to be drilled in said drilling and spacing units, with a bottomhole location no closer than 660 feet to any outer boundary of the units with no setback required to any interior quarter section line:
Township 7 North, Range 94 West, 6th P.M.
Section 2: W½ SW¼
Section 3: E½ SE¼
Section 10: E½ NE¼
Section 11: W½ NW¼
and to allow the McIntyre 1-3 Well, which has been drilled from a surface location in the NE¼ SE¼ of Section 3, Township 7 North, Range 94 West, 6th P.M. to a bottomhole location less than 660 feet from the outer boundary of the unit, to be one of the two permitted wells for said drilling and spacing unit as an exception well; and
Township 7 North, Range 94 West, 6th P.M.
Section 3: SW¼ SE¼, SE¼ SW¼
Section 10: E½ NW¼, W½ NE¼, NE¼ SW¼, NW¼ SE¼
FINDINGS
The Commission finds as follows:
1. Durango Pipeline Corporation (“Durango”), as applicant herein, 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 Commission requires that 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. Sections 2, 3, 10, and 11, Township 7 North, Range 94 West, 6th P.M., are subject to this Rule for the Niobrara and Mancos Formations.
5. On December 30, 2009, Durango, by its attorney, filed with the Commission a verified application for an order to (1) establish an approximate 320-acre drilling and spacing unit consisting of the W½ SW¼ of Section 2, E½ SE¼ of Section 3, E½ NE¼ of Section 10, and W½ NW¼ of Section 11, Township 7 North, Range 94 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara and Mancos Formations, and to allow one optional additional well to be drilled in said drilling and spacing unit, with a bottomhole location no closer than 660 feet to any outer boundary of the unit with no setback required to any interior quarter section line; and (2) establish an approximate 320-acre drilling and spacing unit consisting of the SW¼ SE¼ and SE¼ SW¼ of Section 3, and E½ NW¼, W½ NE¼, NE¼ SW¼, and NW¼ SE¼ of Section 10, Township 7 North, Range 94 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara and Mancos Formations, and to allow one optional additional well to be drilled in said drilling and spacing unit, with a bottomhole location no closer than 660 feet to any outer boundary of the unit with no setback required to any interior quarter section line.
6. No protests or interventions were received by the Commission to Durango’s application. An administrative hearing was conducted before the staff of the Commission on February 16, 2010, during which Cypress Production Inc., operator of the McIntyre 1-3 well, through its attorney, supported the application of Durango. Testimony and exhibits submitted by Durango in support of the application showed that Durango and Cypress Production, Inc. are the only leasehold owners of the application lands.
7. Testimony and exhibits in support of the application showed that type logs, structure and isopach maps, as well as cross section analysis, indicate the Niobrara and Mancos Formations underlie the application lands as a common source of supply. Testimony also indicated that there is a fault-bounded anticline structure underlying the application lands which would allow for increased deliverability from an otherwise impermeable and uneconomic reservoir.
8. Testimony and exhibits in support of the application showed that creation of a 320-acre drilling and spacing unit would promote the economical and efficient drainage of the Niobrara and Mancos Formations underlying the application lands, and that 320 acres is not smaller than the maximum area that can be drained by one well recognizing that, due to the complexity of the fracture porosity of the calcareous intervals, an optional infill well may be necessary to adequately drain the reserves of the Niobrara and Mancos Formations. Testimony also indicated that a drainage area of approximately 164 acres is expected for each well completed in the Niobrara and Mancos Formations underlying the application lands, and that drilling of wells under this application is an economic venture with a discounted payout of 1.72 years.
9. Testimony and exhibits in support of the application showed that the McIntyre 1-3 Well, whose surface location is in the NE¼ SE¼ of Section 3, Township 7 North, Range 94 West, 6th P.M., was drilled horizontally within the Niobrara and Mancos Formations and was completed with a slotted liner terminating near the boundary between the SW¼ SW¼ of Section 2 and the NW¼ NW¼ of Section 3, within the application lands, approximately 550 feet west of the east boundary of those adjoining 40-acre tracts. Further testimony and mud logs submitted in support of the application showed that the probable productive interval within the horizontal wellbore is no closer than 1,053 feet to the east boundary of those adjoining 40-acre tracts. Durango is the lessee of the encroached mineral interest owner, the U.S. Bureau of Land Management, which had no objection to Durango’s application.
10. The above-referenced testimony and exhibits show that the proposed spacing and well density would allow more efficient and economic reservoir drainage, would prevent waste, and would not violate correlative rights.
11. Durango agreed to be bound by oral order of the Commission.
12. Based on the facts stated in the verified application, having received no protests, and the matter having been considered by the Hearing Officer at an administrative hearing, the Commission should enter an order to establish the following two approximate 320-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Niobrara and Mancos Formations, and to allow one optional additional well to be drilled in said drilling and spacing units with a bottomhole location no closer than 660 feet to any outer boundary of the units with no setback required to any interior quarter section line:
Township 7 North, Range 94 West, 6th P.M.
Section 2: W½ SW¼
Section 3: E½ SE¼
Section 10: E½ NE¼
Section 11: W½ NW¼
and to allow the McIntyre 1-3 Well, which has been drilled from a surface location in the NE¼ SE¼ of Section 3, Township 7 North, Range 94 West, 6th P.M. to a bottomhole location less than 660 feet from the outer boundary of the unit be one of the two permitted wells for said drilling and spacing unit as an exception well; and
Township 7 North, Range 94 West, 6th P.M.
Section 3: SW¼ SE¼, SE¼ SW¼
Section 10: E½ NW¼, W½ NE¼, NE¼ SW¼, NW¼ SE¼
ORDER
NOW, THEREFORE IT IS ORDERED, that the following two approximate 320-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Niobrara and Mancos Formations are hereby established and one optional additional well may be drilled in said drilling and spacing units, with a bottomhole location no closer than 660 feet to any outer boundary of the units with no setback required to any interior quarter section line:
Township 7 North, Range 94 West, 6th P.M.
Section 2: W½ SW¼
Section 3: E½ SE¼
Section 10: E½ NE¼
Section 11: W½ NW¼
The McIntyre 1-3 Well, which has been drilled from a surface location in the NE¼ SE¼ of Section 3, Township 7 North, Range 94 West, 6th P.M. to a bottomhole location less than 660 feet from the outer boundary of the unit shall be one of the two permitted wells for said drilling and spacing unit as an exception well; and
Township 7 North, Range 94 West, 6th P.M.
Section 3: SW¼ SE¼, SE¼ SW¼
Section 10: E½ NW¼, W½ NE¼, NE¼ SW¼, NW¼ SE¼
IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith.
IT IS FURTHER ORDERED, that the Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.
IT IS FURTHER ORDERED, that under the State Administrative Procedure Act the Commission considers this order to be final agency action for purposes of judicial review within thirty (30) days after the date this order is mailed by the Commission.
IT IS FURTHER ORDERED, that an application for reconsideration by the Commission of this order is not required prior to the filing for judicial review.
ENTERED this_______ day of March, 2010, as of February 22, 2010.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By__________________________________
Carol Harmon, Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
March 9, 2010