BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE APPLICATION OF CONOCOPHILLIPS COMPANY, FOR AN ORDER TO
POOL ALL INTERESTS WITHIN AN APPROXIMATE 1280-ACRE DRILLING AND SPACING UNIT FOR
SECTIONS 10 AND 11, TOWNSHIP 4 SOUTH, RANGE 64 WEST, 6TH P.M. FOR THE
NIOBRARA FORMATION, UNNAMED FIELD, ARAPAHOE COUNTY, COLORADO |
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CAUSE NO. 535
DOCKET NO. 1307-UP-157
ORDER NO. 535-394
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REPORT OF THE COMMISSION
The Commission heard this matter on July 29, 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 within an
approximate 1280-acre drilling and spacing unit established for Sections 10 and
11, Township 4 South, Range 64 West, 6th P.M., to accommodate the
drilling of the Youngberg 10-11-1H Well, for the development and operation of
the Niobrara Formation.
FINDINGS
The Commission finds as follows:
1.
ConocoPhillips
Company (“ConocoPhillips” 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 January 7, 2013, the Commission entered Order No.
535-245 which, among other things, established an approximate 1280-acre drilling
and spacing unit, and approved up to two horizontal wells within the unit, for
the production of oil, gas and associated hydrocarbons from the Niobrara Formation. Sections 10 and 11, Township 4 South,
Range 64 West, 6th P.M. are subject to this Order for the Niobrara
Formation.
5.
On May 30, 2013, ConocoPhillips,
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 within 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 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 Youngberg 10-11-1H Well (API No. to be determined) and one
additional well (“Wells”), and to subject any nonconsenting interests to the
cost recovery provisions of C.R.S. §34-60-116(7):
Township 4 South, Range 64 West, 6th P.M.
Section 10:
All
Section 11:
All
6.
On July 17, 2013, ConocoPhillips, 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.
7.
Land testimony and exhibits submitted in support of the Application by
Sam Hamidi, Landman for ConocoPhillips, 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 July 29, 2013 hearing date.
8.
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 Youngberg 10-11-1H Well, but did not provide
testimony for any subsequent wells.
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.
ConocoPhillips agreed to be bound by oral order of the Commission.
11.
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 within an
approximate 1280-acre drilling and spacing unit established for Sections 10 and
11, Township 4 South, Range 64 West, 6th P.M., to accommodate the
drilling of the Youngberg 10-11-1H 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 approximate1280-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 Youngberg
10-11-1H Well:
Township 4 South, Range 64 West, 6th P.M.
Section 10:
All
Section 11:
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.
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,
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