BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE APPLICATION OF CARRIZO OIL AND GAS, INC., FOR AN ORDER
POOLING ALL INTERESTS IN AN APPROXIMATE
1280-ACRE DRILLING AND SPACING UNIT LOCATED IN SECTIONS 17 AND 18,
TOWNSHIP 7 NORTH, RANGE 60 WEST, 6TH P.M., FOR THE NIOBRARA
FORMATION, UNNAMED FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 535
DOCKET NO. 1301-UP-08
ORDER NO. 535-253
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REPORT OF THE COMMISSION
The Commission heard this matter on January 7, 2013, at the
Sheraton Denver Downtown Hotel, 1550 Court Place,
Denver, Colorado, upon application for an order to pool all interests in
an approximate 1280-acre drilling and spacing unit established for Sections 17
and 18, Township 7 North, Range 60 West, 6th P.M., to accommodate up
to six horizontal wells, including the Slickrock 2-17-11-60 ST Well, for the development and operation of the
Niobrara Formation.
FINDINGS
The Commission finds as follows:
1.
Carrizo Oil and 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 June 27, 2011, the Commission entered Order No. 535-41 which, among
other things, established nine approximate 640-acre drilling and spacing units,
and approved up to two horizontal wells within each unit, for the production of
oil, gas, and associated hydrocarbons from the Niobrara Formation. Section 18, Township 7 North, Range
60 West, 6th P.M. is subject to this Order for the Niobrara
Formation.
5.
On August 8, 2011, the Commission entered Order No. 535-51 which, among
other things, established nine 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. Section 17, Township 7 North, Range
60 West, 6th P.M. is subject to this Order for the Niobrara
Formation.
6.
On August 8, 2011 the Commission entered Order No. 535-65 which, among
other things, established two approximate 640-acre drilling and spacing units,
and approved up to two horizontal wells within each unit, for the production of
oil, gas and associated hydrocarbons from the Niobrara Formation. Order 535-65 supersedes Order No.
535-51. Section 17, Township 7
North, Range 60 West, 6th P.M. is subject to this Order for the
Niobrara Formation.
7.
On August 20, 2012 the Commission issued Order No. 535-195 which, among
other things, established one 1,280-acre drilling and spacing unit, and approved
up to two horizontal wells within the unit, for the production of oil, gas and
associated hydrocarbons from the Niobrara Formation. with the treated interval
of the wellbore to be no closer than 600 feet from the unit boundaries and with
the internal wellbore setbacks at the option of the Operator based on geological
analysis of faulting and other factors, without exception being granted by the
Director. Sections 17 and 18,
Township 7 North, Range 60 West, 6th P.M. are subject to this Order
for the Niobrara Formation.
8.
On November 2, 2012, Carrizo, by its attorneys, filed with the Commission
a concurrent application (“Concurrent Application”), Docket No. 1301-AW-04, for
an order to approve up to six horizontal wells within an approximate 1280-acre
drilling and spacing unit established for Sections 17 and 18, Township 7 North,
Range 60 West, 6th P.M., 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 600 feet from the treated interval of any other wellbore
located in the unit, without exception being granted by the Director.
9.
On November 2, 2012, Carrizo, 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 1280-acre drilling and spacing
unit established for the below-described lands
(“Application Lands”), for the development and operation of the Niobrara
Formation, to accommodate up to six horizontal wells,
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) are first incurred for
the drilling of the Slickrock 2-17-11-60 ST Well (API No. 05-123-36034)
(“Well”), and to subject any nonconsenting interests to the cost recovery
provisions of C.R.S. § 34-60-116(7):
Township 7 North, Range 60 West, 6th P.M.
Section 17: All
Section 18: All
10. On
December 19, 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.
11.
Land Testimony and exhibits submitted in support of the Application by Craig E.
Wiest, Land Manager – Western US for Carrizo, showed that all nonconsenting
interest owners were notified of the Application and received and Authority for
Expenditure ("AFE") and 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 operation and was received at
least 30 days prior to the January 7, 2013 hearing date.
12. 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.
13.
Carrizo agreed to be bound by oral order of the Commission.
14.
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
approximate 1280-acre drilling and spacing unit established for Sections 17 and
18, Township 7 North, Range 60 West, 6th P.M., to accommodate up to
six horizontal wells, including the
Slickrock 2-17-11-60 ST 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 the approximate 1280-acre drilling
and spacing unit established for the below-described lands, are hereby pooled,
for the development and operation of the Niobrara Formation, to accommodate up
to six horizontal wells, 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) are first incurred for the drilling of the
Slickrock 2-17-11-60 ST Well:
Township 7 North, Range 60 West, 6th P.M.
Section 17: All
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 January, 2013, as of January 7, 2013.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary