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 TO
AFFIRM ORDER 535-188, POOLING ALL INTERESTS IN AN APPROXIMATE 640-ACRE DRILLING
AND SPACING UNIT LOCATED IN SECTION 25, TOWNSHIP 8 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. 1211-UP-282
ORDER NO. 535-310 |
REPORT OF THE COMMISSION
The Commission heard this matter on May 6, 2013, at the Weld County Southwest
Services Complex, 4209 Weld County Road 24 ½, Longmont, Colorado, upon
application for an order to affirm Order No. 535-188 as to previously unnoticed
parties so that it may be applied to interests that were not provided notice of
the initial hearing on said order.
Order No. 535-188 pooled all interests in an approximate 640-acre drilling and
spacing unit established for Section 25, Township 8 North, Range 60 West, 6th
P.M., to accommodate the Hemberger 2-25-34-8-60 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 July 9, 2012, the Commission entered Order No. 535-188 which, among
other things, pooled all interests in an approximate 640-acre drilling and
spacing unit for the development and operation of the Niobrara Formation,
effective as the earlier date of the 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 Hemberger 2-25-34-8-60 Well (API No. 05-123-34404). Section 25, Township 8 North,
Range 60 West, 6th P.M. is subject to Order No. 535-188 for the
Niobrara Formation.
5.
Subsequent to the July 9, 2012 hearing, Carrizo learned of additional
mineral interest owners within the approximate 640-acre drilling and spacing
unit subject to Order No. 535-188, to whom notice of the Pooling Application, as
well as an AFE and offer to lease and/or participate, had not been provided. Applicant has sent an appropriate
offer to lease or participate, and an AFE containing the required information
under Rule 530.a., to the previously unnoticed interested parties.
6.
On September 17, 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 affirm Order No. 535-188 as to previously
unnoticed parties so that it may be applied to interests that were not provided
notice of the initial hearing on said order.
Order No. 535-188 pooled all interests in an approximate 640-acre
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 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 Hemberger
2-25-34-8-60 Well, 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 25: All
7.
On November 7, 2012, Carrizo requested, and Commission Staff granted, a
continuance to the January 7, 2013 hearing.
8.
On December 26, 2012, Carrizo requested, and Commission Staff granted, a
continuance to the February 11, 2013 hearing.
9.
On February 4, 2013, Carrizo requested, and Commission Staff granted, a
continuance to the March 25, 2013 hearing.
10. On
March 8, 2013, Carrizo requested, and Commission Staff granted, a continuance to
the May 6, 2013 hearing, to provide election letters to certain interested
parties at least 30 days before the hearing date.
11. On
April 23, 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.
12.
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 May 6, 2013 hearing date.
13. 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.
14.
Carrizo agreed to be bound by oral order of the Commission.
15.
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 affirm Order No. 535-188 as to
previously unnoticed parties so that it may be applied to interests that were
not provided notice of the initial hearing on said order. Order No. 535-188 pooled all
interests in an approximate 640-acre drilling and spacing unit established for
Section 25, Township 8 North, Range 60 West, 6th P.M., to accommodate
the Hemberger 2-25-34-8-60 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 in the approximate 640-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
date that any of the costs specified in C.R.S. §34-60-116(7)(b)(II) were first
incurred for the drilling of Hemberger 2-25-34-8-60 Well:
Township 8 North, Range 60 West, 6th P.M.
Section 25: All
2.
Previously un-noticed owners shall now be subject to the terms of Order
No. 535-188 in the same manner as those owners already subject to Order No.
535-188.
3.
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.
4.
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.
5.
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.
6.
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.
7.
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.
8.
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 May, 2013, as of May 6, 2013.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary