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

 

IN THE MATTER OF THE APPLICATION OF CARRIZO OIL AND GAS, INC., FOR AN ORDER TO APPROVE UP TO SIXTEEN HORIZONTAL WELLS WITHIN AN APPROXIMATE 640-ACRE DRILLING AND SPACING UNIT FOR SECTION 14, TOWNSHIP 8 NORTH, RANGE 60 WEST, 6TH P.M., FOR THE NIOBRARA FORMATION, UNNAMED FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 535

 

DOCKET NO. 1310-AW-75

 

ORDER NO. 535-457

 

 

REPORT OF THE COMMISSION

 

            The Commission heard this matter on January 27, 2014, at the Centennial Building, 1313 Sherman Street, Denver, Colorado, upon application for an order to approve one additional horizontal well, for a total of up to 14 horizontal wells within an approximate 640-acre drilling and spacing unit established for Section 14, Township 8 North, Range 60 West, 6th P.M. for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Carrizo Oil and Gas, Inc. (“Carrizo” 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 September 19, 2011, the Commission entered Order No. 535-69 which, among other things, established 40 approximate 640-acre drilling and spacing units, and approved two horizontal wells within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.  Section 14, Township 8 North, Range 60 West, 6th P.M. is subject to this Order for the Niobrara Formation.

 

5.         On July 29, 2013, the Commission entered Order No. 535-367 which, among other things, approved up to 13 horizontal wells within an approximate 640-acre drilling and spacing unit, for the development of oil, gas, and associated hydrocarbons from the Niobrara Formation, with the treated interval of the wellbore to be located no closer than 600 feet from the unit boundaries, and no closer than 300 feet from the treated interval of any other wellbore located in the unit. Section 14, Township 8 North, Range 60 West, 6th P.M. is subject to this Order for the Niobrara Formation.

 

6.         On July 29, 2013, the Commission entered Order No. 535-391 which, among other things, pooled all interests in an approximate 640-acre drilling and spacing unit, to accommodate the drilling of the Schneider 2-14-8-60 Well, for the development and operation of the Niobrara Formation. Section 14, Township 8 North, Range 60 West, 6th P.M. is subject to this Order for the Niobrara Formation.

 

7.         On July 18, 2013, Carrizo, by its attorneys, filed with the Commission pursuant to §34-60-116, C.R.S., a verified application (“Application”) for an order to approve an additional three horizontal wells, for a total of up to 16 horizontal wells within an approximate 640-acre drilling and spacing unit established for the below-described lands (“Application Lands”) 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 300 feet from the unit boundaries, and no closer than 300 feet from the productive interval of any other wellbore located in the unit, without exception being granted by the Director:

 

                        Township 8 North, Range 60 West, 6th P.M.

                        Section 14:      All

 

8.         Applicant stated that the proposed wells shall be located on no more than one wellpad per quarter section within the drilling and spacing unit.

 

9.         On October 16, 2013 (Amended January 24, 2014), Carrizo, 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.

 

10.       Land testimony and exhibits submitted in support of the Application by Craig E. Wiest, Land Manager for Carrizo, showed that the Applicant is an owner with the right to drill wells in the Application Lands.

 

11.       Geologic testimony and exhibits submitted in support of the Application by Paul Fears, Geologist for Carrizo, showed that the Niobrara Formation underlies the Application Lands.  An isopach map of the interval from the top of the Niobrara Formation to the top of the Codell Formation showed the total thickness of the Niobrara averages approximately 350 feet.  A type log of the Niobrara Formation showed resistivity and density values similar to logs from analogous wells producing from the Niobrara Formation.  Stratigraphic cross-sections and gross thickness isopach tests show the Niobrara to be consistent, continuous, and underlying all the Application Lands.

 

12.       Engineering testimony and exhibits submitted in support of the Application by Stephen C. Peters, Reservoir Engineering Manager for Carrizo, showed that using reservoir properties, determined from performance of actual wells drilled by Carrizo as a basis for modeling, analog development scenarios resulted in efficient drainage of an area of approximately 32 acres per wellbore.  This 32 acres is the approximate area per wellbore that would result from 16 wellbores within the unit with 300 feet offset from unit and interwell boundaries.  Testimony also showed that the modeled production anticipated to be recovered by each well indicated sound economics and would therefore serve to protect correlative rights and avoid waste.

 

13.       On October 22, 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.

 

14.       On October 17, 2013, Carrizo, by its attorneys, requested, and Commission staff granted, a continuance to the December 16, 2013 hearing.

 

15.       On November 19, 2013, Carrizo, by its attorneys, requested, and Commission staff granted, a continuance to the January 27, 2014 hearing.

 

16.       On January 21, 2013, Carrizo and BLM agreed to the following language with regard to exterior boundary setbacks:

 

“with the intrawell distance to be no closer than 300 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 east and west section lines of Section 14, Township 8 North, Range 60 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 eastern section line of Section 14, Township 8 North, Range 60 West, 6th P.M. upon application and approval of 300 foot boundary setbacks by the Commission for the western boundary of Section 13, Township 8 North, Range 60 West, 6th P.M. and corresponding reciprocal setbacks of 300 feet along the western section line of Section 14, Township 8 North, Range 60 West, 6th P.M. upon application and approval of 300 foot boundary setbacks by the Commission for the eastern section line of Section 15, Township 8 North, Range 60 West, 6th P.M., without exception being granted by the Director.”

 

Due to the withdrawal of the reduced setbacks, Carrizo requested one additional horizontal well, for a total of up to fourteen horizontal wells.

 

17.       On January 21, 2014, BLM withdrew its Protest to the Application.

 

18.       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.

 

19.       Carrizo agreed to be bound by oral order of the Commission. 

 

20.       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 approve one additional horizontal well, for a total of up to 14 horizontal wells within an approximate 640-acre drilling and spacing unit established for Section 14, Township 8 North, Range 60 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.         One additional horizontal well, for a total of up to 14 horizontal wells within an approximate 640-acre drilling and spacing unit established for the below-described lands, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation:

 

 

                    Township 8 North, Range 60 West, 6th P.M.

                    Section 14:          All

 

2.         The proposed wells shall be located on no more than one wellpad per quarter section within the drilling and spacing unit.

 

3.         The intrawell distance to be no closer than 300 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 east and west section lines of Section 14, Township 8 North, Range 60 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 eastern section line of Section 14, Township 8 North, Range 60 West, 6th P.M. upon application and approval of 300 foot boundary setbacks by the Commission for the western boundary of Section 13, Township 8 North, Range 60 West, 6th P.M. and corresponding reciprocal setbacks of 300 feet along the western section line of Section 14, Township 8 North, Range 60 West, 6th P.M. upon application and approval of 300 foot boundary setbacks by the Commission for the eastern section line of Section 15, Township 8 North, Range 60 West, 6th P.M., without exception being granted by the Director.

 

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 35 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   21st   day of February, 2014, as of January 27, 2014.

           

 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary