BEFORE
THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
|
IN THE MATTER OF AN APPLICATION BY CONOCOPHILLIPS COMPANY FOR AN ORDER TO POOL ALL INTERESTS IN AN APPROXIMATE 1280-ACRE EXPLORATORY DRILLING AND SPACING UNIT ESTABLISHED FOR SECTIONS 34 AND 35, TOWNSHIP 3 SOUTH, RANGE 65 WEST, 6TH P.M., FOR THE NIOBRARA FORMATION, UNNAMED FIELD, ADAMS COUNTY, COLORADO |
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CAUSE NO. 535
DOCKET NO. 1310-UP-227
ORDER NO. 535-441 |
REPORT OF THE COMMISSION
The Commission heard this matter on December 16, 2013, at the Ralph L. Carr Colorado Judicial Center, 1300 Broadway, 1st Floor, Room 1E, Denver, Colorado, upon application for an order to pool all interests in an approximate 1280-acre exploratory drilling and spacing unit established for Sections 34 and 35, Township 3 South, Range 65 West, 6th P.M., to accommodate the Reserve 3-65 34 & 35 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 October 31, 2011, the Commission entered Order No. 535-89 which, among other things, established 18 approximate 640-acre drilling and spacing units and approve up to two horizontal wells within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with surface locations being located anywhere within the unit or adjacent lands, but the lateral of such well may not enter the Niobrara Formation any closer than 300 feet from the section line, with the treated interval of the permitted wellbore to be located no closer than 460 feet from the boundary of the unit and no closer than 920 feet from the treated interval of any other well in the unit producing from the Niobrara Formation. Section 34, Township 3 South, Range 65 West, 6th P.M. is subject to this Order for the Niobrara Formation.
5. On October 28, 2013, the Commission entered Order No. 535-430 which, among other things, vacated an approximate 640-acre drilling and spacing unit established by Order No. 535-89 for Section 34, Township 3 South, Range 65 West, 6th P.M., and established an approximate 1280-acre exploratory 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 34 and 35, Township 3 South, Range 65 West, 6th P.M. are subject to this Order for the Niobrara Formation.
6. On August 29, 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 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 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 Reserve 3-65 34 & 35 1H Well and one other well (API Nos. – to be determined) (“Wells”), and to subject any nonconsenting interests to the cost recovery provisions of C.R.S. §34-60-116(7):
Township 3 South, Range 65 West, 6th P.M.
Section 34: All
Section 35: All
7. On December 3, 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.
8. Land testimony and exhibits submitted in support of the Application by Samuel A. Hamidi, Landman, Rockies Business Unit, Niobrara Land, for ConocoPhillips, 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 December 16, 2013 hearing date.
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 resolved all 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 34 and 35, Township 3 South, Range 65 West, 6th P.M. to accommodate the Reserve 3-65 34 & 35 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 an approximate 1280-acre drilling and spacing unit all 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 Reserve 3-65 34 & 351H Well:
Township 3 South, Range 65 West, 6th P.M.
Section 34: All
Section 35: 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.
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 _____ day of January, 2014, as of December 16, 2013.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary