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 TO POOL ALL INTERESTS IN AN APPROXIMATE 1280-ACRE DRILLING AND SPACING
UNIT ESTABLISHED FOR SECTIONS 8 AND 17, TOWNSHIP 6 NORTH, RANGE 60 WEST, 6th
P.M., FOR THE NIOBRARA FORMATION,
UNNAMED FIELD, MORGAN COUNTY, COLORADO |
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CAUSE NO. 535
DOCKET NO. 1303-UP-67
ORDER NO. 535-309 |
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 in an approximate
1280-acre drilling and spacing unit
established for Sections 8 and 17, Township 6 North, Range 60 West, 6th
P.M., to accommodate the Wickstrom 17-1H Well, 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.
Sections 8 and 17, Township 6 North, Range
60 West, 6th P.M. are subject to Rule 318.a. for the Niobrara
Formation.
5.
On January 24, 2013, Condor, by its attorneys, filed a concurrent
application (“Spacing Application”), Docket No. 1303-SP-49, requesting that the
Commission establish an approximate 1280-acre drilling and spacing unit for
Sections 8 and 17, Township 6 North, Range
60 West, 6th P.M., and approve up to eight horizontal wells
within the unit, for the production of oil, gas and associated hydrocarbons from
the Niobrara Formation.
6.
On January 24, 2013, Condor, by its attorneys, filed with the Commission
a verified application (“Application”) for an order to pool all interests in an
approximate 1280-acre 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 this Application, or the date that
the costs specified in C.R.S. § 34-60-116(7)(b)(II) were first incurred for the
drilling of the Wickstrom 17-1H Well (“Well”), and to subject any nonconsenting
interests to the cost recovery provisions of C.R.S. § 34-60-116(7):
Township 6 North, Range 60 West, 6th P.M.
Section 8:
All
Section 17:
All
7.
On March 11, 2013, Prima Exploration, Inc. (“Prima”), by its attorneys,
filed with the Commission a written protest (“Protest”) to the Application.
8.
Land testimony and exhibits submitted in support of the Application by
Sean Fitzgerald, of South Texas Reservoir Alliance LLC as contract operator for
Condor, showed that all nonconsenting interest owners were notified of the
Application and received an 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.
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. The
Commission requested that this matter be set for review by the Commission in one
year.
12.
Based on the facts stated in the verified Application, having received one
protest, and based on the evidence presented to the Commission at an
adjudicatory hearing, the Commission should enter an order to pool all interests
in an approximate 1280-acre drilling and
spacing unit established for Sections 8 and 17, Township 6 North, Range 60 West,
6th P.M., to accommodate the Wickstrom 17-1H 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, 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 Wickstrom 17-1H Well:
Township 6 North, Range 60 West, 6th
P.M.
Section 8:
All
Section 17:
All
2.
The production obtained from the drilling and spacing unit shall be
allocated to each owner in the drilling and spacing 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
16th day
of April, 2013, as of March 25, 2013.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary