BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE APPLICATION OF CARRIZO OIL & GAS, INC. FOR AN ORDER TO POOL
ALL INTERESTS IN FIVE APPROXIMATE 640-ACRE DRILLING AND SPACING UNITS LOCATED IN
SECTION 9, TOWNSHIP 8 NORTH, RANGE 60 WEST, SECTION 20, TOWNSHIP 8 NORTH, RANGE
61 WEST, SECTION 15, TOWNSHIP 9 NORTH, RANGE 59 WEST AND SECTIONS 25 AND 35,
TOWNSHIP 9 NORTH, RANGE 60 WEST, 6TH P.M., FOR THE NIOBRARA
FORMATION, WATTENBERG FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 535
DOCKET NO. 1302-UP-41
ORDER NO. 535-287 |
REPORT OF THE COMMISSION
The Commission heard this matter on March 25, 2013, 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 five
approximate 640-acre drilling and spacing units established for Section 20,
Township 8 North, Range 61 West, 6th P.M., Section 15, Township 9
North, Range 59 West, 6th P.M., Sections 25 and 35, Township 9 North,
Range 60 West, 6th P.M., and Section 9, Township 8 North, Range 60
West, 6th P.M., to accommodate
the drilling of the Hitz 1-9-8-60 Well,
the Sievers 20-44-8-61 Well, the Castor 15-41-9-59 Well, the Shull
1-25-9-60 Well, and the Shull 35-11-9-60 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 February 21, 2011, the Commission entered Order No. 535-3 which, among
other things, established 160 approximate 640-acre drilling and spacing units,
and authorized one horizontal well within each unit, for the production of oil,
gas and associated hydrocarbons from the Niobrara Formation. Section 20, Township 8 North, Range
61 West, 6th P.M., Section 15, Township 9 North, Range 59 West, 6th
P.M., Sections 25 and 35, Township 9 North, Range 60 West, 6th P.M.
are subject to this Order for the Niobrara Formation.
5.
On September 19, 2011, the Commission entered Order No. 535-69 which,
among other things, established 40 approximate 640-acre drilling and spacing
units, and authorized two horizontal wells within each unit, for the production
of oil, gas and associated hydrocarbons from the Niobrara Formation. Section 9, Township 8 North, Range 60
West, 6th P.M. is subject to this Order for the Niobrara Formation.
6.
On December 13, 2012, Carrizo Oil and Gas, Inc. (“Carrizo” or
“Applicant”), by its attorneys, filed with the Commission pursuant to §34-60-116
C.R.S., a concurrent application (“Concurrent Application”), Docket No.
1302-AW-09, for an order to approve up to a total of six horizontal wells within
each of five approximate 640-acre drilling and spacing units, 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.
7.
On December 13, 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 within five approximate
640-acre drilling and spacing units 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 Hitz
1-9-8-60 Well (API No. 05-123-36421), the
Sievers 20-44-8-61 Well (API No. 05-123-34346), the
Castor 15-41-9-59 Well (API No.
05-123-34101), the Shull 1-25-9-60 Well
(API No. 05-123-34045), and the
Shull 35-11-9-60 Well (API No. 05-123-34032) (“Wells”), 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.
Section 9:
All
(DSU #1 - Hitz 1-9-8-60)
Township 8 North, Range 61 West, 6th
P.M.
Section 20:
All
(DSU #2 - Sievers 20-44-8-61)
Township 9 North, Range 59 West, 6th
P.M.
Section 15:
All
(DSU #3 - Castor 15-41-9-59)
Township 9 North, Range 60 West, 6th
P.M.
Section 25:
All
(DSU #4 - Shull 1-25-9-60)
Township 9 North, Range 60 West, 6th
P.M.
Section 35:
All
(DSU #5 - Shull 35-11-9-60)
8.
On January 30, 2013, Carrizo, by its attorneys, requested, and the
Secretary of the Commission granted, a continuance to the March hearing.
9.
On March 8, 2013, 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.
10.
Land testimony and exhibits submitted in support of the Application by Craig E.
Wiest, Land Manager 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 March 25, 2013 hearing date.
11. 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.
12.
Carrizo agreed to be bound by oral order of the Commission.
13.
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 five
approximate 640-acre drilling and spacing units established for Section 20,
Township 8 North, Range 61 West, 6th P.M., Section 15, Township 9
North, Range 59 West, 6th P.M., Sections 25 and 35, Township 9 North,
Range 60 West, 6th P.M., and Section 9, Township 8 North, Range 60
West, 6th P.M., to
accommodate the drilling of the Hitz
1-9-8-60 Well, the Sievers 20-44-8-61 Well, the Castor 15-41-9-59 Well, the
Shull 1-25-9-60 Well, and the Shull 35-11-9-60 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 within five approximate 640-acre drilling and
spacing units 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 any of the costs
specified in C.R.S. §34-60-116(7)(b)(II) are first incurred for the drilling of
the Hitz 1-9-8-60 Well, the Sievers
20-44-8-61 Well, the Castor 15-41-9-59 Well, the Shull 1-25-9-60 Well, and the
Shull 35-11-9-60 Well:
Township 8 North, Range 60 West, 6th
P.M.
Section 9:
All
(DSU #1 - Hitz 1-9-8-60)
Township 8 North, Range 61 West, 6th
P.M.
Section 20: All
(DSU #2 - Sievers 20-44-8-61)
Township 9 North, Range 59 West, 6th
P.M.
Section 15: All
(DSU #3 - Castor 15-41-9-59)
Township 9 North, Range 60 West, 6th
P.M.
Section 25: All
(DSU #4 - Shull 1-25-9-60)
Township 9 North, Range 60 West, 6th
P.M.
Section 35:
All
(DSU #5 - Shull 35-11-9-60)
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 5th day
of April, 2013, as of March 25, 2013.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary