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

 

IN THE MATTER OF THE APPLICATION OF WHITING OIL AND GAS CORPORATION FOR AN ORDER TO POOL ALL INTERESTS IN AN APPROXIMATE 960-ACRE DRILLING AND SPACING UNIT ESTABLISHED FOR Sections 28 and 33, Township 10 north, RANGE 58 WEST, 6th P.M., FOR THE NIOBRARA FORMATION, UNNAMED FIELD, Weld County, Colorado

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CAUSE NO. 535

 

DOCKET NO. 1403-UP-84

 

ORDER NO. 535-470

 

REPORT OF THE COMMISSION

 

The Commission heard this matter on March 17, 2014, at the offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon an application for an order to pool all interests within an approximate 960-acre drilling and spacing unit established for Sections 28 and 33, Township 10 North, Range 58 West, 6th P.M., and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S. for the Razor 33-2813H Well, for the development and operation of the Niobrara Formation.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Whiting Oil and Gas Corporation (“Whiting” 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, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of any permitted well to be no closer than 600 feet from the unit boundaries.  Sections 28 and 33, Township 10 North, Range 58 West, 6th P.M. are subject to this Order for the Niobrara Formation.

 

5.         On July 9, 2012, the Commission entered Order No. 535-178 which established eight approximate 960-acre drilling and spacing units and approved up to four horizontal wells within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of any permitted well to be no closer than 600 feet from the unit boundaries and no closer than 1,200 feet from the treated interval of any other wellbore located in the unit.  Sections 28 and 33, Township 10 North, Range 58 West, 6th P.M. are subject to this Order for the Niobrara Formation.

 

6.         On March 25, 2013, the Commission entered Order No. 535-296 which approved up to eight horizontal wells within each of 21 approximate 640 to 960-acre drilling and spacing units, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the wellbore to be no closer than 200 feet from the treated interval of any other wellbore producing from the Niobrara Formation, and no closer than 100 feet from a unit boundary unless such boundary abuts or corners lands for which the Commission has not at the time of the drilling permit application granted the right to locate the treated interval of the wellbore no closer than 100 feet from a unit boundary, without exception being granted by the Director.  If the Commission has not at the time of the drilling permit application granted to the owners of the adjacent or cornering lands the right to locate the treated interval of the wellbore no closer than 100 feet from a unit boundary, then the treated interval of the wellbore shall be located no closer than the distance permitted in the adjacent or cornering lands.  Sections 28 and 33, Township 10 North, Range 58 West, 6th P.M. are subject to this Order for the Niobrara Formation.

 

7.         On May 6, 2013, the Commission entered Order No. 535-314 which approved up to sixteen horizontal wells within each of 21 approximate 640 to 960-acre drilling and spacing units, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.  Sections 28 and 33, Township 10 North, Range 58 West, 6th P.M. are subject to this Order for the Niobrara Formation.

 

8.         On January 16, 2014, Whiting, 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 960-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 §34-60-116(7)(b), C.R.S. were first incurred for the drilling of the Razor 33-2813H Well (API No. 05-123-36579) (“Well”) and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S.:

 

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

            Section 28:      S½

            Section 33:      All

 

9.         On March 3, 2014, NorthStar Energy Company, LLC (“NorthStar” or “Protestant”) filed a Protest to the Application alleging it had recently leased mineral interests within the Application Lands and had not been provided information required by Rule 530.

 

10.       On March 5, 2014, NorthStar withdrew its Protest to the Application.

 

11.       On March 6, 2014, Whiting, 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.

 

12.       Land testimony and exhibits submitted in support of the Application by Scott McDaniel, Regional Land Manager for Whiting, 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 March 17, 2014 hearing date.

 

13.       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 Razor 33-2813H Well, but did not provide testimony for any subsequent wells.

 

14.       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.

 

15.       Whiting agreed to be bound by oral order of the Commission. 

 

16.       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 960-acre drilling and spacing unit established for Sections 28 and 33, Township 10 North, Range 58 West, 6th P.M., and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S. for the Razor 33-2813H 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 960-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 §34-60-116(7)(b), C.R.S. are first incurred for the drilling of the Razor 33-2813H Well:

 

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

            Section 28:      S½

            Section 33:      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 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.         For any other well authorized under Commission Order No. 535-314, if any owner to whom notice is delivered as provided in Commission Rule 530 does not elect in writing to lease or participate in such well within the 30-day notice period provided by Commission Rule 530, then such owner shall be deemed nonconsenting as to the proposed well, but only if the proposed well is commenced no later than ninety (90) days after expiration of the 30-day notice period and completed with due diligence, provided, however, said commencement date may be extended upon written notice by the operator to the other parties for reasons of force majeure.

 

8.         If a proposed well is not commenced prior to or within ninety (90) days after expiration of the notice period of thirty (30) days (including any extension thereof caused by force majeure) and completed with due diligence, then written notice proposing such well must be resubmitted to all nonconsenting parties in accordance with Commission Rule 530 as if no prior proposal had been made, and the parties shall have a new 30-day period within which to lease or consent to participate in such well.

 

9.         With respect to any future well drilled in the spacing unit, in order for this pooling order to apply to such well, the operator of the proposed well shall file with the Commission an affidavit stating that the requirements of Commission Rule 530 have been satisfied for such well.

 

10.       Nothing in this order is intended to conflict with Section 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 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   11th   day of April, 2014, as of March 17, 2014.    

 

 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary