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 16 HORIZONTAL WELLS WITHIN AN APPROXIMATE 640-ACRE  DRILLING AND SPACING UNIT ESTABLISHED FOR SECTION 25, TOWNSHIP 8 NORTH, RANGE 60 WEST, FOR THE NIOBRARA FORMATION, UNNAMED FIELD,  WELD COUNTY, COLORADO

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CAUSE NO. 535

 

DOCKET NO. 1401-AW-02

 

ORDER NO. 535-458

 

 

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 an additional 10 horizontal wells, for a total of up to 16 horizontal wells within an approximate 640-acre drilling and spacing unit established for Section 25, 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. 535-70 which established two 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 treated interval of the wellbore to be located no closer than 600 feet from the unit boundaries. Section 25, Township 8 North, Range 60 West, 6th P.M. is subject to this Order for the Niobrara Formation.

 

5.         On July 9, 2012, the Commission entered Order No. 535-188 which, among other things, pooled all interests in an approximate 640-acre drilling and spacing unit established for Section 25, Township 8 North, Range 61 West, 6th P.M., to accommodate the Hemberger 2-25-34-8-60 Well, for the development and operation of the Niobrara Formation.

 

6.         On November 15, 2012, the Commission entered Order No. 535-219 which, among other things, approved up to four horizontal wells within each of three approximate 640-acre drilling and spacing units, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation. Section 25, Township 8 North, Range 60 West, 6th P.M. is subject to this Order for the Niobrara Formation.

 

7.         On March 25, 2013, the Commission entered Order No. 535-294 which, among other things, approved up to six horizontal wells within each of three approximate 640-acre drilling and spacing units, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the horizontal wellbore to be no closer than 600 feet from the unit boundaries, and no closer than 600 feet from the treated interval of any other wellbore located in the unit. Section 25, Township 8 North, Range 60 West, 6th P.M. is subject to this Order for the Niobrara Formation.

 

8.         On May 6, 2013, the Commission entered Order No. 535-310 which, among other things, made previously un-noticed interest owners within Section 25, Township 8 North, Range 61 West, 6th P.M., subject to the terms of Order No. 535-188 in the same manner as those owners.

 

9.         On November 27, 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 10 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 treated interval of the wellbore to be located no closer than 300 feet from the unit boundaries, and no closer than 300 feet from the treated 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 25:      All

 

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

 

11.       On Januar y 15, 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.

 

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

 

13.       On January 17, 2013, Carrizo and the 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 north section line of Section 25, 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 northern section line of Section 25, Township 8 North, Range 60 West, 6th P.M. upon application and approval of 300 foot boundary setbacks by the Commission for the southern section line of Section 24, Township 8 North, Range 60 West, 6th P.M., without exception being granted by the Director.”

 

 

14.       On January 22, 2013, 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.

 

15.       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.

 

16.       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.

 

17.       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.

 

18.       On January 23, 2014, BLM withdrew its Protest to the Application.

 

19.       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.

 

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

 

21.       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 an additional 10 horizontal wells within an approximate 640-acre drilling and spacing unit established for Section 25, 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.         An additional 10 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, 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 25:      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 north section line of Section 25, 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 northern section line of Section 25, Township 8 North, Range 60 West, 6th P.M. upon application and approval of 300 foot boundary setbacks by the Commission for the southern section line of Section 24, 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