BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE APPLICATION OF DAKOTA EXPLORATION, LLC FOR AN ORDER TO
POOL ALL INTERESTS WITHIN AN APPROXIMATE 640-ACRE DRILLING AND SPACING UNIT FOR
SECTION 2, TOWNSHIP 11 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. 1307-UP-168
ORDER NO. 535-407
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REPORT OF THE COMMISSION
The Commission heard this matter on September 16, 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 640-acre drilling and spacing unit established for
Section 2, Township 11 North, Range 59 West, 6th P.M. to
accommodate the Smock 1-2-11-59H Well, the Smock 2-2-11-59H Well, the Smock
3-2-11-59H Well and the Smock 4-2-11-59H Well, for the development and operation
of the Niobrara Formation.
FINDINGS
The Commission finds as follows:
1.
Dakota Exploration, LLC (“Dakota” 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, on unspaced lands, 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 2, Township 11 North, Range
59 West, 6th P.M. is subject to Rule 318.a. for the Niobrara
Formation.
5.
On May 30, 2013, Dakota, by its
attorneys, filed with the Commission pursuant to §34-60-116 C.R.S., a verified
application (“Concurrent Application”), Docket No. 1307-SP-1140, for an order to
establish an approximate 640-acre drilling and spacing unit for the
below-described lands (“Application Lands”), 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 May 30, 2013, Dakota, 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 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 Smock 1-2-11-59H Well,
the Smock 2-2-11-59H Well, the Smock 3-2-11-59H Well and the Smock 4-2-11-59H
Well (“Wells”), and to subject any nonconsenting interests to the cost recovery
provisions of C.R.S. §34-60-116(7):
Township 11 North, Range 59 West, 6th P.M.
Section 2:
All
7.
On August 27, 2013, Dakota, 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.
8.
Land testimony and exhibits submitted in support of the Application by
Kevin Conners, Manager/Owner of Conners Oil and Gas LLC, Contractor for Dakota,
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 September 16,
2013 hearing date.
9.
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 Smock
1-2-11-59H Well, the Smock 2-2-11-59H Well, the Smock 3-2-11-59H Well and the
Smock 4-2-11-59H Well.
10. 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.
11.
Dakota agreed to be bound by oral order of the Commission.
12.
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 640-acre drilling and spacing unit established for
Section 2, Township 11 North, Range 59
West, 6th P.M. to accommodate the Smock 1-2-11-59H Well, the Smock
2-2-11-59H Well, the Smock 3-2-11-59H Well and the Smock 4-2-11-59H 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 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 Smock 1-2-11-59H
Well, the Smock 2-2-11-59H Well, the Smock 3-2-11-59H Well and the Smock
4-2-11-59H Well, for the development and operation of the Niobrara Formation:
Township 11 North, Range 59 West, 6th P.M.
Section 2:
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 Wells 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.
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 11th
day of October, 2013, as of September 16,
2013.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary