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 A 1280-ACRE
DRILLING AND SPACING UNIT LOCATED IN SECTIONS 29 AND 32, TOWNSHIP 8 NORTH, RANGE
61 WEST, 6TH P.M., FOR THE NIOBRARA FORMATION, UNNAMED FIELD, WELD
COUNTY, COLORADO |
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CAUSE NO. 535
DOCKET NO. 1301-UP-15
ORDER NO. 535-256
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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 29 and 32, Township 8 North, Range 61 West, 6th
P.M., to accommodate up to six horizontal wells, including the
Gaffney 1-32-8-61 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 November 15, 2012, the Commission entered Order No. 535-221 which,
among other things, established an approximate 1280-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. Sections 29 and 32, Township 8 North,
Range 61 West, 6th P.M. are subject to this Order for the Niobrara
Formation.
5.
On November 2, 2012, Carrizo,
by its attorneys, filed with the Commission a concurrent application
(“Concurrent Application”), Docket No. 1301-AW-05, for an order to approve up to
six horizontal wells within an approximate 1280-acre drilling and spacing unit,
for the production of oil, gas and associated hydrocarbons from the Niobrara
Formation.
6.
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) were first incurred for the drilling of the Gaffney
1-32-8-61 Well (API No. 05-123-36370) (“Well”) and to subject any nonconsenting interests to
the cost recovery provisions of C.R.S. § 34-60-116(7):
Township 8 North, Range 61 West, 6th P.M.
Section 29: All
Section 32: All
7.
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.
8.
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.
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.
Carrizo 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 in an
approximate 1280-acre drilling and spacing unit established for Sections 29 and
32, Township 8 North, Range 61 West, 6th P.M., to accommodate up to
six horizontal wells, including the Gaffney
1-32-8-61 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
Gaffney 1-32-8-61 Well:
Township 8 North, Range 61 West, 6th P.M.
Section 29: All
Section 32: 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