BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE APPLICATION OF CONDOR ENERGY TECHNOLOGY LLC FOR AN ORDER
POOLING ALL INTERESTS IN A 640-ACRE EXPLORATORY DRILLING AND SPACING UNIT
LOCATED IN SECTION 18, TOWNSHIP 7 NORTH, RANGE 59 WEST, 6TH P.M., FOR
THE NIOBRARA FORMATION, UNNAMED FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 535
ORDER NO. 535-209
DOCKET NO. 1210-UP-241
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REPORT OF THE COMMISSION
The
Commission heard this matter on October 1, 2012, at the Routt County Justice
Center, 1955 Shield Drive, Steamboat Springs, Colorado, upon application for
an order to pool all interests in an approximate
640-acre exploratory drilling and spacing unit for Section 18, Township 7 North,
Range 59 West, 6th P.M., for the development and operation of the
Niobrara Formation.
FINDINGS
The
Commission finds as follows:
1.
Condor Energy Technology LLC,
(“Condor” 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.
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,
unless authorized by order of the Commission upon hearing. Section 18, Township 7 North, Range
59 West, 6th P.M. is subject to Rule 318.a for the Niobrara
Formation.
5.
On August 1, 2012, Condor, by its attorneys, filed with the Commission a
concurrent application (“Concurrent Application”), Docket No. 1210-SP-97, for an
order establishing an approximate 640-acre exploratory drilling and spacing
unit, and approving up to four horizontal wells within the unit, for the
production of oil, gas and associated hydrocarbons from the Niobrara Formation. Section 18, Township 7 North, Range
59 West, 6th P.M. is subject to this Concurrent Application.
6.
On August 1, 2012, Condor, 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 in an approximate 640-acre exploratory drilling and
spacing unit established for the below-described lands (“Application Lands”),
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 Waves 2H Well,
and to subject any nonconsenting interests to the cost recovery provisions of
C.R.S. § 34-60-116(7):
Township 7 North, Range 59 West, 6th P.M.
Section 18: All
7.
On September 18, 2012, Condor, 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
Sean Fitzgerald, Contract Operator for Condor, 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 Waves 2H 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 October 1, 2012 hearing date. Correspondence from
Condor to interest owners only referred to costs of a single well.
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. Condor
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 Hearings Officer review of the Application under Rule 511., the
Commission should enter an order to pool all interests in an approximate
640-acre exploratory drilling and spacing unit for Section 18, Township 7 North,
Range 59 West, 6th P.M., to accommodate the Waves 2H 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 exploratory
drilling and spacing unit established 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 Waves 2H Well:
Township 7 North, Range 59 West, 6th P.M.
Section 18: 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 October, 2012, as of October 1, 2012.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary