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 EXPLORATORY DRILLING AND
SPACING UNIT ESTABLISHED FOR SECTIONS 29 AND 32, TOWNSHIP 7 NORTH, RANGE 59
WEST, 6TH P.M., FOR THE NIOBRARA
FORMATION, UNNAMED FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 535
DOCKET NO. 1306-UP-105
ORDER NO. 535-358 |
REPORT OF THE COMMISSION
The Commission heard this matter on June 17, 2013, at the Two Rivers Convention
Center, 159 Main Street, Grand Junction, Colorado, upon application for an order
to pool all interests in an approximate 1280-acre exploratory drilling and
spacing unit established for Sections 29 and 32, Township 7 North, Range 59
West, 6th P.M., to accommodate the
Ford 32-1H Well and the seven
subsequent authorized wells drilled to the Niobrara Formation, 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.
Section 29, Township 7 North, Range 59 West, 6th P.M. is subject to
Rule 318.a. for the Niobrara Formation.
5.
On March 5, 2012, the Commission entered Order No. 535-144 which, among
other things, established three approximate 640-acre exploratory 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 32, Township 7 North, Range
59 West, 6th P.M. is subject to this Order for the Niobrara
Formation.
6.
On March 5, 2012, the Commission entered Order No. 535-154 which, among
other things, pooled all interests in an approximate 640-acre exploratory
drilling and spacing unit established for Section 32, Township 7 North, Range 59
West, 6th P.M., for the development and operation of the Niobrara
Formation.
7.
On April 18, 2013, Condor, by its attorneys, filed with the Commission a
verified spacing application (“Concurrent Application”), Docket No. 1306-SP-96,
for an order to: 1) vacate an approximate 640-acre exploratory drilling and
spacing unit established by Order No. 535-144 for Section 32, Township 7 North,
Range 59 West, 6th P.M.; 2) vacate Order No. 535-154 which pooled all
interests in an approximate 640-acre exploratory drilling and spacing unit
established for Section 32, Township 7 North, Range 59 West, 6th
P.M.; and 3) establish an approximate 1280-acre exploratory drilling and spacing
unit for Sections 29 and 32, Township 7 North, Range 59 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.
8.
On April 18, 2013, Condor, 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 exploratory 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
earlier of the date of this Application, or the date that the costs specified in
C.R.S. § 34-60-116(7)(b)(II) are first incurred for the drilling of the
Ford 32-1H Well and any of the
seven subsequent authorized wells referenced in the Concurrent Application, and
to subject any nonconsenting interests to the cost recovery provisions of C.R.S.
§34-60-116(7):
Township 7 North, Range 59 West, 6th
P.M.
Section 29:
All
Section 32:
All
9.
On June 4, 2013, Condor, 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 Sean
Fitzgerald, Engineering and Land Manager of South Texas Reservoir Alliance LLC
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 June 17, 2013 hearing
date.
11.
Land testimony showed the Applicant complied with the requirements of Rule 530,
and is entitled to the cost recovery provisions pursuant to §34-60-116(7),
C.R.S., for the Ford 32-1H Well, but did not provide testimony for any
subsequent wells.
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.
Condor 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 exploratory drilling and spacing unit established for
Sections 29 and 32, Township 7 North, Range 59 West, 6th P.M., to
accommodate the Ford 32-1H Well, for the development and operation of the Niobrara
Formation.
ORDER
IT IS HEREBY ORDERED:
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 Ford 32-1H Well:
Township 7 North, Range 59 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. Any party seeking the cost recovery
provisions of §34-60-116 (7), C.R.S., shall first comply with subsection (d) for
any subsequent well(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.
1.
The provisions contained in the above order shall become effective
immediately.
2.
The Commission expressly reserves its right, after notice and hearing, to
alter, amend or repeal any and/or all of the above orders.
3.
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.
4.
An application for reconsideration by the Commission of this Order is not
required prior to the filing for judicial review.
ENTERED THIS
8th
day of July, 2013, as of June 17, 2013.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary