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. 535-200
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REPORT OF THE COMMISSION
The
Commission heard this matter on August 20, 2012, at the offices of the Colorado
Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon
application for an order to pool all interests within an approximate 640-acre
drilling and spacing unit established for Section 9, Township 9 North, Range 59
West, 6th P.M., to accommodate the Timbro LC13-72HN Well, for the
development and operation of the Niobrara
Formation.
FINDINGS
The
Commission finds as follows:
1.
Noble Energy, Inc. (“Noble” 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 February
22, 2011, the Commission issued Order No. 535-3 which, among other things,
established 160 approximate 640-acre drilling and spacing units, and approved
one horizontal well within each unit, for the production of oil, gas and
associated hydrocarbons from the Niobrara Formation, with the treated interval
of the wellbore to be located no closer than 600 feet from the unit boundaries
and no closer than 1,200 feet from the treated interval of any other wellbore
located within the unit. Section 9,
Township 9 North, Range 59 West, 6th P.M. is subject to this Order
for the Niobrara Formation.
5.
On June 20, 2012,
Noble,
by its attorneys, filed with the Commission pursuant to § 34-60-116 C.R.S., a
verified application (“Application”)
for an order
to pool all interests within an approximate 640-acre drilling and spacing unit
for the below-described lands (“Application Lands”), to accommodate the Timbro
LC13-72HN Well (“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 9
North, Range 59 West, 6th P.M.
Section 9:
All
6.
On August 7, 2012,
Noble,
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.
Land testimony and exhibits submitted in support of the Application
Joseph H. Lorenzo, Senior Land Manager for Noble, 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 August 20, 2012 hearing date.
9.
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.
10. Noble
agreed to be bound by oral order of the Commission.
11. 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 within an approximate
640-acre drilling and spacing unit established for Section 9, Township 9 North,
Range 59 West, 6th P.M., to accommodate the Timbro LC13-72HN 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 drilling and
spacing unit established for the
below-described lands, are hereby pooled, to accommodate the Timbro LC13-72HN
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 the costs specified in C.R.S.
§34-60-116(7)(b)(II) are first incurred for the drilling of the Well:
Township 9
North, Range 59 West, 6th P.M.
Section 9: All
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
day of August, 2012, as of
August 20, 2012.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary
Dated: August
30, 2012