BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO

 

IN THE MATTER OF THE APPLICATION OF NOBLE ENERGY, INC. FOR AN ORDER TO VACATE UNITS ESTABLISHED BY ORDER NOS. 535-3 AND 535-69, VACATE ORDER NO. 535-125, AND TO ESTABLISH AN APPROXIMATE 3200-ACRE UNCONVENTIONAL RESOURCE UNIT FOR SECTIONS 1, 2, 11 AND 12, TOWNSHIP 9 NORTH, RANGE 58 WEST, 6TH P.M. AND SECTION 36, TOWNSHIP 10 NORTH, RANGE 58 WEST, 6TH P.M., FOR THE CODELL-NIOBRARA FORMATION, UNNAMED FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 535

 

DOCKET NO. 1312-SP-1209

 

ORDER NO. 535-451

 

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: 1) vacate three approximate 640-acre drilling and spacing units established by Order No. 535-3 for Sections 2, 11 and 12, Township 9 North, Range 58 West, 6th P.M.; 2) vacate an approximate 640-acre drilling and spacing unit established by Order No. 535-69 for Section 1, Township 9 North, Range 58 West, 6th P.M.; 3) vacate Order No. 535-126; and 4) establish an approximate 3,200-acre unconventional resource unit for Sections 1, 2, 11 and 12, Township 9 North, Range 58 West, 6th P.M. and Section 36, Township 10 North, Range 58 West, 6th P.M., and approve an appropriate number of vertical, directional or horizontal wells in order to efficiently and economically recover the oil, gas and associated hydrocarbons from the proposed unit, for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Noble Energy, LLC (“Noble” 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 February 22, 2011, the Commission entered Order No. 535-3 which established 160 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.  Sections 2, 11 and 12, Township 9 North, Range 58 West, 6th P.M. are subject to this Order for the Niobrara Formation.

 

5.         On September 19, 2011, the Commission entered Order No. 535-69 which established 40 approximate 640-acre drilling and spacing units, and approved up to two horizontal wells within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the productive interval of the wellbore to be located no closer than 600 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located in the unit.  Section 1, Township 9 North, Range 58 West, 6th P.M. is subject to this Order for the Niobrara Formation.

 

6.         On January 23, 2012, the Commission entered Order No. 535-126 which established an approximate 640-acre exploratory drilling and spacing unit, and approved one or more vertical or horizontal wells, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations, with the productive interval of the wellbore to be located no closer than 600 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located in the unit.  Section 36, Township 10 North, Range 58 West, 6th P.M. is subject to this Order for the Codell-Niobrara Formation.

 

7.         On October 17, 2013, Noble, by its attorneys, filed with the Commission, a verified application (“Application”) for an order to: 1) vacate three approximate 640-acre drilling and spacing units established by Order No. 535-3 for Sections 2, 11 and 12, Township 9 North, Range 58 West, 6th P.M.; 2) vacate an approximate 640-acre drilling and spacing unit established by Order No. 535-69 for Section 1, Township 9 North, Range 58 West, 6th P.M.; 3) vacate Order No. 535-126; and 4) establish an approximate 3,200-acre unconventional resource unit for the below-described lands (“Application Lands”), for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation, and approve an appropriate number of vertical, directional or horizontal wells in order to efficiently and economically recover the oil, gas and associated hydrocarbons from the proposed unit, with the productive interval of the wellbore to be located no closer than 300 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, without exception being granted by the Director:

 

                        Township 9 North, Range 58 West, 6th P.M.

                        Section 1:        All

                        Section 2:        All

                        Section 11:      All

                        Section 12:      All

 

                        Township 10 North, Range 58 West, 6th P.M.

                        Section 36:      All

 

Applicant stated new horizontal wells shall be drilled from a maximum of sixteen new wellpads within the URU or on adjacent lands, with no more than eight new wellpads per section, unless an exception is granted by the Director.

 

Applicant requested that the Commission exclude any and all existing vertical or directional wells drilled and completed to the Codell-Niobrara Formation (or the Codell or Niobrara Formation individually, as indicated on the applicable Application for Permit to Drill – “APD”) from the proposed 3,200 acre unit.  Any production from existing vertical or directional wells drilled and completed to the Codell-Niobrara Formation (or the Codell or Niobrara Formation individually, as indicated on the applicable APD) shall continue to be allocated on the current payment of production basis and such allocation shall not be effected by the approval of this Application.

 

Applicant requested that the Commission include any and all existing horizontal wells drilled and completed to the Codell-Niobrara Formation (or the Codell or Niobrara Formation individually, as indicated on the applicable Application for Permit to Drill – “APD”) from the proposed 3,200 acre unit.  Any production from existing horizontal wells drilled and completed to the Codell-Niobrara Formation (or the Codell or Niobrara Formation individually, as indicated on the applicable APD) shall be re-allocated on the 3,200 acre unit basis as of the first day of the month following approval by the Commission.

 

8.         On December 3, 2013, Noble, 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.         On December 10, 2013, the Bureau of Land Management (“BLM”) filed a Protest to the Application, alleging the request for 300 foot setbacks along exterior unit boundaries would negatively impact the BLM’s correlative rights in lands adjacent to the proposed unit, and that the request for reduced setbacks was unsupported by the submitted testimony.

 

10.       On December 12, 2013, Noble and the BLM agreed to the following language with regard to exterior boundary setbacks:

 

“with the intrawell distance to be no closer than 150 feet from the productive interval of any other wellbore producing from the Codell-Niobrara Formation, and no closer than 300 feet from the exterior boundaries of the unit, except along the southern section lines of Sections 11 and 12, Township 9 North, Range 58 West, 6th P.M. which shall be no closer than 600 feet from the exterior unit boundary, with a further exception allowing for corresponding reciprocal setbacks of 300 feet along the southern section lines of Sections 11 and 12, upon application and approval of 300 foot boundary setbacks by the Commission for the northern section lines of Sections 13 and 14, Township 9 North, Range 58 West, 6th P.M., without exception being granted by the Director.”

 

11.       On December 12, 2013, BLM withdrew its Protest to the Application.

 

12.       Land testimony and exhibits submitted in support of the Application by Julie Jenkins, Land Manager for Noble, showed the following:

 

a.            The Application Lands consist of 100% fee surface.

 

b.            The Application Lands consist of 80% fee minerals and 20% State minerals. There are no Federal minerals within the Application Lands.

 

c.            Noble, and its partners, own a 92.8% leasehold ownership interest in the Application Lands.

 

d.            There are two proposed facility locations within the URU to process and handle oil, gas and associated hydrocarbon production from the wells in the URU. 

 

e.            Noble is in the process of negotiating surface-use agreements with the surface owners covering the proposed well pads and facilities and will utilize reasonable mitigation measures to minimize effects of oil and gas operations.

 

f.             All working interest and unleased interest owners in the application lands have been sent a Unit Agreement and Unit Operating Agreement.  The Unit Agreement and Unit Operating Agreement will govern both the existing horizontal wells and all new horizontal wells within the Unit from the first day of the month following approval of the Unit by the COGCC.

 

13.       Geologic testimony and exhibits submitted in support of the Application by Mark Nicholson, Geologist for Noble, stated that the Codell and Niobrara Formations exist under the URU, and that microseismic results show that during hydraulic fracturing seismic events are occurring through the Niobrara and Codell formations, and that such events indicate that both formations are connected through the hydraulic fracture and may be producing as a single formation, the Codell-Niobrara Formation, as a common source of supply

 

14.       Engineering testimony and exhibits submitted in support of the Application by Chandler Newhall, Senior Production Engineer for Noble, showed that volumetric calculations of the Codell-Niobrara formation indicate the estimated recovery factor using a horizontal lateral would be approximately 0.075% per well and that multiple horizontal laterals can capture additional reserves without the need for drilling individual vertical wells, reducing surface disturbance in the URU by approximately 67%.  Testimony concluded the economics of the project were sound.

 

15.       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.

 

16.       Noble agreed to be bound by oral order of the Commission.

 

17.       The Commission requested that this matter be set for review by the Commission in one year and annually thereafter, without exception being granted by the Commission.

 

18.       Based on the facts stated in the verified Application, having resolved all protests, and upon a hearing before the Commission, the Commission may enter an order to: 1) vacate three approximate 640-acre drilling and spacing units established by Order No. 535-3 for Sections 2, 11 and 12, Township 9 North, Range 58 West, 6th P.M.; 2) vacate an approximate 640-acre drilling and spacing unit established by Order No. 535-69 for Section 1, Township 9 North, Range 58 West, 6th P.M.; 3) vacate Order No. 535-126; and 4) establish an approximate 3,200-acre unconventional resource unit for Sections 1, 2, 11 and 12, Township 9 North, Range 58 West, 6th P.M. and Section 36, Township 10 North, Range 58 West, 6th P.M., and approve an appropriate number of vertical, directional or horizontal wells in order to efficiently and economically recover the oil, gas and associated hydrocarbons from the proposed unit, for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.         Three approximate 640-acre drilling and spacing units established by Order No. 535-3 for Sections 2, 11 and 12, Township 9 North, Range 58 West, 6th P.M., are hereby vacated.

 

2.         An approximate 640-acre drilling and spacing unit established by Order No. 535-69 for Section 1, Township 9 North, Range 58 West, 6th P.M., is hereby vacated.

 

3.         Order No. 535-126, is hereby vacated.

 

4.         An approximate 3,200-acre unconventional resource unit for the below-described lands, is hereby established, for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation, and an appropriate number of vertical, directional or horizontal wells in order to efficiently and economically recover the oil, gas and associated hydrocarbons from the proposed unit, are hereby approved:

 

                        Township 9 North, Range 58 West, 6th P.M.

                        Section 1:        All

                        Section 2:        All

                        Section 11:      All

                        Section 12:      All

 

                        Township 10 North, Range 58 West, 6th P.M.

                        Section 36:      All

 

5.         The intrawell distance shall be no closer than 150 feet from the productive interval of any other wellbore producing from the Niobrara Formation, and no closer than 300 feet from the exterior boundaries of the unit, except along the southern section lines of Sections 11 and 12, Township 9 North, Range 58 West, 6th P.M. which shall be no closer than 600 feet from the exterior unit boundary, with a further exception allowing for corresponding reciprocal setbacks of 300 feet along the southern section lines of Sections 11 and 12, upon application and approval of 300 foot boundary setbacks by the Commission for the northern section lines of Sections 13 and 14, Township 9 North, Range 58 West, 6th P.M., without exception being granted by the Director.

 

6.         New horizontal wells shall be drilled from a maximum of sixteen new wellpads within the URU or on adjacent lands, with no more than eight new wellpads per section, unless an exception is granted by the Director. 

 

7.         Existing vertical/directional wells shall be excluded from the URU.  Existing vertical/directional wells shall continue to pay on their current spacing or leasehold status.

 

8.         Three existing horizontal wells within the URU – the Castor PC LA36-68HN, the Castor LD11-75HN, and the Castor LD12-78HN, shall be included in the new 3,200-acre URU, with production and costs being re-allocated from the first day of the month following approval of the URU by the Commission.

 

9.         This matter shall be set for review by the Commission in one year and annually thereafter, without exception being granted by the Commission.

 

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