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 640-ACRE EXPLORATORY DRILLING AND
SPACING UNIT ESTABLISHED FOR SECTION 5, TOWNSHIP 6 NORTH, RANGE 60 WEST, 6TH
P.M., FOR THE NIOBRARA FORMATION, UNNAMED FIELD, MORGAN COUNTY, COLORADO |
)
)
)
)
)
)
)
) |
CAUSE NO. 535
DOCKET NO. 1306-UP-131
ORDER NO. 535-366 |
REPORT OF THE COMMISSION
The Commission heard this matter on July 29, 2013, at 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 640-acre
exploratory drilling and spacing unit for
Section 5, Township 6 North, Range 60 West, 6th P.M., to
accommodate the Schmidt 5-1H 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.
Section 5, Township 6 North, Range 60 West, 6th P.M. is subject to
Rule 318.a. for the Niobrara Formation.
5.
On April 18, 2013, Condor, by its attorneys, filed a verified application
(“Concurrent Application”), Docket No. 1306-SP-101, for an order to establish an
approximate 640-acre exploratory drilling and spacing unit for Section 5,
Township 6 North, Range 60 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 Niobrara Formation.
6.
On March 7, 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 640-acre exploratory drilling and spacing unit 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 Schmidt 5-1H Well and the three subsequent wells authorized to
be drilled within the unit 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 6 North, Range
60 West, 6th P.M.
Section 5:
All
7.
On May 17, 2013, Condor requested and Commission staff granted a
continuance to the July 29, 2013 hearing.
8.
On July 16, 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.
9.
Land testimony and exhibits submitted in support of the Application by
Sean Fitzgerald, Land Manager for 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 July 29, 2013 hearing date.
10.
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 Schmidt 5-1H Well,
but did not provide testimony for any subsequent wells.
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.
Condor 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 in an
approximate 640-acre exploratory drilling
and spacing unit for Section 5, Township 6 North, Range 60 West, 6th
P.M., to accommodate the Schmidt 5-1H 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 640-acre exploratory
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 Schmidt 5-1H Well:
Township 6 North, Range 60 West, 6th
P.M.
Section 5:
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 27 day
of August, 2013, as of July 29, 2013.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary