BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE APPLICATION OF BILL BARRETT CORPORATION FOR AN ORDER TO
POOL ALL INTERESTS IN TWO APPROXIMATE 640-ACRE DRILLING AND SPACING UNITS
ESTABLISHED FOR SECTION 23, TOWNSHIP 6 NORTH, RANGE 62 WEST, 6TH
P.M., FOR THE CODELL AND NIOBRARA FORMATIONS, WATTENBERG FIELD, WELD COUNTY,
COLORADO |
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CAUSE NOS. 407 & 535
DOCKET NO. 1306-UP-103
ORDER NOS. 407-805 & 535-359 |
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 two approximate 640-acre drilling and spacing units
established for Section 23, Township 6 North, Range 62 West, 6th
P.M., to accommodate the Pappenheim 6-62-23-0164BH Well to the Niobrara
Formation and the Pappenheim 6-62-23-0164CDH Well to the Codell Formation, for
the development and operation of the Codell and Niobrara Formations.
FINDINGS
The Commission finds as follows:
1.
Bill Barrett Corporation (“BBC”
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 April 27, 1988, the Commission adopted Rule 318A which, among other
things, allowed certain drilling locations to be utilized to drill or twin a
well, deepen a well or recomplete a well and to commingle any or all Cretaceous
Age Formations from the base of the Dakota Formation to the surface. Rule 318A supersedes all prior
Commission drilling and spacing orders affecting well location and density
requirements of Greater Wattenberg Area wells. On December 5, 2005,
Rule 318A was amended, among other things, to allow interior infill and boundary
wells to be drilled and wellbore spacing units to be established. On
August 8, 2011, Rule 318A was again amended, among other things, to address
drilling of horizontal wells.
Section 23, Township 6 North, Range 62 West, 6th P.M. is subject to
Rule 318A for the Codell and Niobrara Formations.
5.
On February 22, 2011 (corrected April 4, 2013), the Commission entered
Order Nos. 407-779 and 535-4 which, among other things, established 78
approximate 640-acre drilling and spacing units, and approved one horizontal
well within each unit, for the production of oil, gas and associated
hydrocarbons from the Niobrara Formation. Section 23, Township 6 North, Range 62
West, 6th P.M. is subject to this Order for the Niobrara Formation.
6.
On March 25, 2013, the Commission entered Order Nos. 407-766 and 535-297
which, among other things, approved up to eight horizontal wells within an
approximate 640-acre drilling and spacing unit established for Section 23,
Township 6 North, Range 62 West, 6th P.M., for the production of oil,
gas and associated hydrocarbons from the Niobrara Formation.
7.
On April 18, 2013, BBC, by its attorneys, filed a verified amended
application (“ Concurrent Amended Application”), Docket No. 1305-SP-78, for an
order to establish an approximate 640-acre drilling and spacing unit for Section
23, Township 6 North, Range 62 West, 6th P.M., and approve up to four
horizontal wells within the unit, for the production of oil, gas and associated
hydrocarbons from the Codell Formation.
8.
On April 18, 2013, BBC, by its attorneys, filed with the Commission
pursuant to §34-60-116 C.R.S., a verified application (“Application”) for an
order to:
1) pool 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 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 Pappenheim
6-62-23-0164BH Well (formerly the Pappenheim 6-62-23-8H Well) (API No.
05-123-37266) (“Well”) and any subsequent horizontal Niobrara Formation wells,
and to subject any nonconsenting interests to the cost recovery provisions of
C.R.S. §34-60-116(7); and
2) pool all interests in an
approximate 640-acre drilling and spacing unit established for the
below-described Application Lands, for the development and operation of the
Codell 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 Pappenheim 6-62-23-0164CDH Well (No API.
Number) (“Well”) drilled to the Codell Formation and any subsequent horizontal
Codell Formation wells, and to subject any nonconsenting interests to the cost
recovery provisions of C.R.S. §34-60-116(7):
Township 6 North, Range 62 West, 6th P.M.
Section 23:
All (DSU #1 - Pappenheim
6-62-23-0164BH, Niobrara)
Section 23:
All (DSU #2 - Pappenheim
6-62-23-0164CDH, Codell)
9.
On June 4, 2013, BBC, 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 Hal
Writer, Senior Landman for BBC, 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 Pappenheim 6-62-23-0164BH Well and the Pappenheim
6-62-23-0164CDH 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. BBC
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 two
approximate 640-acre drilling and spacing units established for Section 23,
Township 6 North, Range 62 West, 6th P.M., to accommodate the
Pappenheim 6-62-23-0164BH Well to the Niobrara Formation and the Pappenheim
6-62-23-0164CDH Well to the Codell Formation, for the development and operation
of the Codell and Niobrara Formations.
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 two approximate 640-acre drilling and
spacing units established for the below-described lands, are hereby pooled, for
the development and operation of the Codell and Niobrara
Formations, 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 Pappenheim 6-62-23-0164BH Well to the Niobrara
Formation and the Pappenheim 6-62-23-0164CDH Well to the Codell Formation:
Township 6 North, Range 62 West, 6th P.M.
Section 23:
All (DSU #1 - Pappenheim
6-62-23-0164BH, Niobrara)
Section 23:
All (DSU #2 - Pappenheim
6-62-23-0164CDH, Codell)
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