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. 535-189
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REPORT OF THE COMMISSION
The Commission heard this matter on July 9, 2012, in Suite 801, The Chancery
Building, 1120 Lincoln Street, Denver, Colorado, upon application for an order
to pool all interests in an approximate 640-acre designated drilling and spacing
unit for Section 26, Township 8 North, Range 60 West, 6th P.M., to
accommodate the Hemberger 1-26-34-8-60 Well, for the development and operation
of the Niobrara Formation.
FINDINGS
The Commission finds as follows:
1.
Carrizo
Oil & Gas, Inc. (“Carrizo” 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 October 31, 2011, the Commission entered Order No. 535-91 which, among
other things, established two approximate 640-acre drilling and spacing units
for certain lands and authorized up to two horizontal wells within each unit,
for the production of oil, gas and associated hydrocarbons from the Niobrara
Formation, with the treated interval of the permitted wellbore to be located no
closer than 600 feet from the boundary of the unit and no closer than 1200 feet
from the treated interval of any other wellbore completed in the Niobrara,
without exception being granted by the Director.
Section 26, Township 8 North, Range 60 West, 6th P.M. is
subject to Order No. 535-91 for the Niobrara Formation.
5.
On May 10, 2012, Carrizo, filed with the Commission, pursuant to
§ 34-60-116 C.R.S., a verified application (“Application”) for an order to pool
all interests in an approximate 640-acre drilling and spacing unit for the
below-described lands (“Application Lands”), to accommodate the Hemberger
1-26-34-8-60 Well (API No. 05-123-34430) (“Well”), for the development and
operation of the Niobrara Formation,
effective as of the earlier of the date of the Application, or the date that any
of the costs specified in C.R.S. § 34-60-116(7)(b)(II) were first incurred for
the drilling of the Well, and to subject any nonconsenting interests to the cost
recovery provisions of C.R.S. § 34-60-116(7):
Township 8 North, Range 60
West, 6th P.M.
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6.
On June 26, 2012, Carrizo, 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.
7.
Testimony and exhibits submitted in support of the Application by Craig
E. Wiest, Land Manager – Western U.S. for Carrizo Oil & Gas, Inc., showed that
all nonconsenting interest owners were notified of the Application and received
an Authority for Expenditure (“AFE”) and an offer to participate in the Well. Further testimony concluded that the
AFE sent by the Applicant to the interest owners was a fair and reasonable
estimate of the costs of the proposed drilling and operation and was received at
least 30 days prior to the July 9, 2012 hearing date.
8.
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.
9.
Carrizo
agreed to be bound by oral order of the Commission.
10.
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 pool all interests in an
established 640-acre designated drilling and spacing unit for Section 26,
Township 8 North, Range 60 West, 6th P.M., to accommodate the
Hemberger 1-26-34-8-60 Well, for the development and operation of the Niobrara
Formation.
ORDER
NOW, THEREFORE IT IS ORDERED,
that:
1.
Pursuant to the provisions of §34-60-116, C.R.S., as amended, of the Oil
and Gas Conservation Act, all interests in an approximate 640-acre designated
drilling and spacing unit for the below-described lands, are hereby pooled, for
the development and operation of the Niobrara Formation, effective as of the
earlier of the date of the Application, or the date that the costs specified in
C.R.S. §34-60-116(7)(b)(II) are first incurred for the drilling of the Hemberger
1-26-34-8-60 Well:
Township 8 North, Range 60
West, 6th P.M.
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2.
The production obtained from the drilling and spacing unit shall be
allocated to each owner in the unit on the basis of the proportion that the
number of acres in such tract bears to the total number of mineral acres within
the drilling and spacing unit; each owner of an interest in the drilling and
spacing unit shall be entitled to receive its share of the production of the
Well located on the drilling and spacing unit applicable to its interest in the
drilling and spacing unit.
3.
The nonconsenting leased (working interest) owners must reimburse the
consenting working interest owners for their share of the costs and risks of
drilling and operating the Well (including penalties as provided by
§34-60-116(7)(b), C.R.S.) out of production from the drilling and spacing unit
representing the cost-bearing interests of the nonconsenting working interest
owners as provided by §34-60-116(7)(a), C.R.S.
4.
Any unleased owners are hereby deemed to have elected not to participate
and shall therefore be deemed to be nonconsenting as to the Well and be subject
to the penalties as provided for by §34-60-116 (7), C.R.S.
5.
Each nonconsenting unleased owner within the drilling and spacing unit
shall be treated as the owner of the landowner's royalty to the extent of 12.5%
of its record title interest, whatever that interest may be, until such time as
the consenting owners recover, only out of each nonconsenting owner's
proportionate 87.5% share of production, the costs specified in
§34-60-116(7)(b), C.R.S. as amended.
After recovery of such costs, each unleased nonconsenting mineral owner shall
then own its proportionate 8/8ths share of the Well, surface facilities and
production, and then be liable for its proportionate share of further costs
incurred in connection with the Well as if it had originally agreed to the
drilling.
6.
The operator of the well drilled on the above-described drilling and
spacing unit shall furnish the nonconsenting owners with a monthly statement of
all costs incurred, together with the quantity of oil and gas produced, and the
amount of proceeds realized from the sale of production during the preceding
month.
7.
Nothing in this order is intended to conflict with §34-60-116, C.R.S., as
amended. Any conflict that may arise
shall be resolved in favor of the statute.
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
11th
day of July, 2012, as of July 9,
2012.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
July 11, 2012