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 AN UNNAMED FIELD,
WELD COUNTY, COLORADO |
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CAUSE NO. 535
ORDER NO. 535-161
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REPORT OF THE COMMISSION
The
Commission heard this matter on May 29, 2012, in Suite 801, The Chancery
Building, 1120 Lincoln Street, Denver, Colorado, upon application for an order
to: 1) amend Order No. 535-46 to authorize drilling up to four wells within the
unit for Section 30, Township 8 North, Range 64 West, 6th P.M.; and
2) establish an approximate 640-acre drilling and spacing unit for Section 34,
Township 9 North, Range 65 West, 6th P.M., and authorize drilling up
to four 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.
Marathon Oil Company (“Marathon” or “Applicant”),
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.
On June 27, 2011, the Commission entered Order No. 535-46 which, among
other things: 1) established five approximate 640-acre drilling and spacing
units, and authorized one horizontal well within each unit, for the production
of oil, gas and associated hydrocarbons from the Niobrara Formation; and 2)
required the completed interval of any horizontal well to be no closer than 600
feet from the boundaries of the unit, and the distance between the completed
interval of any horizontal well to be no closer than 150 feet from the wellbore
of any existing or permitted oil and gas well.
Section 30,
Township 8 North, Range 64 West, 6th P.M. is subject to this Order
for the Niobrara Formation.
5.
Rule 318.a. of the Rules and Regulations of the Oil and Gas Conservation
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. Section 34, Township 9 North, Range 65
West, 6th P.M. is subject to Rule 318.a.
6.
On March 30, 2012, Marathon, by its attorneys, filed with the Commission
a verified application (“Application”) for an order to: 1) amend Order No.
535-46 to authorize drilling up to four wells within the unit for the
below-described lands (“Prior DSU”), for the production of oil, gas and
associated hydrocarbons from the Niobrara Formation, with the treated interval
of any horizontal well to be no closer than 600 feet from the boundaries of the
unit, without exception being granted by the Director:
Township 8 North, Range 64 West, 6th
P.M.
Section 30:
ALL
(Prior DSU #1 – 640-acres);
and 2) establish an approximate 640-acre drilling
and spacing unit for the below-described lands
and authorize drilling up to four horizontal wells within the unit, for
the production of oil, gas and associated hydrocarbons from the Niobrara
Formation, with the treated interval of any horizontal well to be no closer than
600 feet from the boundaries of the unit, without exception being granted by the
Director:
Township 9
North, Range 65 West, 6th P.M.
Section 34: ALL
(DSU #2 – 640-acres)
Applicant
requested to locate the surface location anywhere on the Application lands.
Collectively, Prior DSU #1 and DSU #2 are referred to as the Application Lands.
7.
On May 15, 2012,
Marathon, 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.
Land testimony and exhibits submitted in support of the Application by
Tricia Clarke, Land Professional for Marathon, showed that the Applicant has
fully leased the mineral interests in each section of the Application Lands,
that the Application Lands are private fee leases and that the interested
parties received notice of the Application at least 30 days prior to the May 29,
2012 hearing.
9.
Geologic testimony and exhibits in support of the Application by Matthew
Humphreys, Advanced Senior Geologist for Marathon, showed that the Niobrara
Formation underlies most of the DJ Basin in eastern Colorado, southeastern
Wyoming, and western Nebraska. An
isopach map of the Niobrara Formation showed the total thickness of the Niobrara
Formation ranges from 270 to 320 feet across the Application Lands. A type log for the Niobrara Formation
showed that it consists of two members, the Smoky Hill Chalk and the Fort Hayes
Limestone. A stratigraphic cross-section
of the Application Lands showed the Niobrara Formation to be consistent,
continuous, and underlying all of the Application Lands as a common source of
supply.
10.
Engineering testimony and exhibits in support of the Application by Tara
Watson, Reservoir Engineer for Marathon, showed analysis of a number of wells
within the Application Lands demonstrated a range estimated ultimate recovery
("EUR") values from 40 to 472 MBO; a range of original oil-in-place ("OOIP"),
from 794 to 9,446 MBO; and a drainage area ranging from 46 to 534-acres, with an
average of 177-acres. The Silo field, north of the Application Lands in southern
Wyoming, is a major field producing from the Niobrara Formation. EUR and drainage estimates
(which vary from 29 to 507-acres for horizontal wells) for the Silo field were
included in Applicant's engineering analysis.
Additional testimony indicated granting the proposed spacing application
will result in efficient and economic development of Application Lands.
11. 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.
12. Marathon
agreed to be bound by oral order of the Commission.
13. 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 to: 1) amend Order No. 535-46 to authorize
drilling up to four wells within the unit for Section 30, Township 8 North,
Range 64 West, 6th P.M.; and 2) establish an approximate 640-acre
drilling and spacing unit for Section 34, Township 9 North, Range 65 West, 6th
P.M., and authorize drilling up to four horizontal wells within the unit, for
the production of oil, gas and associated hydrocarbons from the Niobrara
Formation.
ORDER
NOW, THEREFORE IT IS ORDERED, that Order No.
535-46, is hereby amended, to authorize up to four wells within the unit for the
below-described lands, for the production of oil, gas and associated
hydrocarbons from the Niobrara Formation, with the treated interval of any
horizontal well to be no closer than 600 feet from the boundaries of the unit,
without exception being granted by the Director:
Township 8 North, Range 64 West, 6th
P.M.
Section 30:
ALL
(Prior DSU #1 – 640-acres)
IT IS FURTHER ORDERED, that an approximate
640-acre drilling and spacing unit for the below-described lands, is hereby
approved, and up to four horizontal wells within the unit, are hereby approved,
for the production of oil, gas and associated hydrocarbons from the Niobrara
Formation, with the treated interval of any horizontal well to be no closer than
600 feet from the boundaries of the unit, without exception being granted by the
Director:
Township 9
North, Range 65 West, 6th P.M.
Section 34: ALL
(DSU #2 – 640-acres)
IT IS FURTHER
ORDERED, that the surface location may be located anywhere on the Application
lands, consistent with existing Rules and Orders of the Commission, without
exception being granted by the Director.
IT IS FURTHER
ORDERED, that the
provisions contained in the above order shall become effective immediately.
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 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
4th
day of June, 2012, as of May 29,
2012.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Peter J. Gowen, Acting Secretary
Dated at
Suite 801
1120 Lincoln
Street
Denver,
Colorado 80203
June 4, 2012