BEFORE THE OIL AND
GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
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IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE CODELL AND NIOBRARA FORMATIONS, UNNAMED FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 535
DOCKET NO. 1404-SP-2041
ORDER NO. 535-480 |
REPORT OF THE COMMISSION
The Commission heard this matter on April 28, 2014, at the offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon application for an order to: 1) vacate five approximate 640-acre drilling and spacing units established by Order No. 535-3 for Sections 25, 26, 27, 34 and 35, Township 9 North, Range 59 West, 6th P.M.; 2) vacate pooling Order No. 535-257; 3) vacate pooling Order No. 535-282; 4) vacate pooling Order No. 535-434; and 5) establish an approximate 3,200-acre unconventional resource unit (“URU”) for Sections 25, 26, 27, 34, and 35, Township 9 North, Range 59 West, 6th P.M., 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 25, 26, 27, 34, and 35, Township 9 North, Range 59 West, 6th P.M. are subject to this Order for the Niobrara Formation.
5. On January 7, 2013, the Commission entered Order No. 535-257 which pooled all interests in an approximate 640-acre drilling and spacing unit established by Order No. 535-3 for Section 34, Township 9 North, Range 59 West, 6th P.M. to accommodate the drilling of the Castor LC 34-68HN Well (API No. 05-123-33451) for the development and operation of the Niobrara Formation. Section 25, Township 9 North, Range 59 West, 6th P.M. is subject to this Order for the Niobrara Formation.
6. On March 25, 2013, the Commission entered Order No. 535-282 which pooled all interests in an approximate 640-acre drilling and spacing unit established by Order No. 535-3 for Section 25, Township 9 North, Range 59 West, 6th P.M. to accommodate the drilling of the Castor LC 25-72HN Well (API No. 05-123-33166) for the development and operation of the Niobrara Formation. Section 25, Township 9 North, Range 59 West, 6th P.M. is subject to this Order for the Niobrara Formation.
7. On January 7, 2013, the Commission entered Order No. 535-434, which pooled all interests in an approximate 640-acre drilling and spacing unit established by Order No. 535-3 for Section 34, Township 9 North, Range 59 West, 6th P.M. to accommodate the drilling of the Castor LC 34-68HN Well (API No. 05-123-33451) for the development and operation of the Niobrara Formation. Section 34, Township 9 North, Range 59 West, 6th P.M. is subject to this Order for the Niobrara Formation.
8. On February 27, 2014, Noble, by its attorneys, filed with the Commission a verified application (“Application”) for an order to: 1) vacate five approximate 640-acre drilling and spacing units established by Order No. 535-3 for Sections 25, 26, 27, 34 and 35, Township 9 North, Range 59 West, 6th P.M.; 2) vacate pooling Order No. 535-257; 3) vacate pooling Order No. 535-282; 4) vacate pooling Order No. 535-434; and 5) establish an approximate 3,200-acre unconventional resource unit (“URU”) 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, except the eastern section boundary of Section 25 and the southern section boundary of Section 35 which shall remain at 600 feet, 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 59 West, 6th P.M.
Section 25: ALL
Section 26: ALL
Section 27: ALL
Section 34: ALL
Section 35: ALL
9. 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.
10. Applicant requested the Commission consider the Codell-Niobrara Formation as a common source of supply underlying the Application Lands because there is no significant stratigraphic barrier between the formations and could be completed as a single completion.
11. 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.
12. 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.
13. On April 15, 2014, 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.
14. 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 100% fee minerals. There are no Federal or state minerals within the Application Lands.
c. Noble, and its partners, own a 91.8% leasehold ownership interest in the Application Lands.
d. Noble plans to drill as many wells as needed to efficiently and economically recover the associated hydrocarbons from the Codell-Niobrara formation. The wells are proposed to be drilled from no more than sixteen new well pads in the URU with no more than eight new wellpads per section, unless an exception is granted by the Director or specifically requested by the surface onwer. There are four 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 intends to utilize reasonable mitigation measures that intend to minimize effects of oil and gas development on the public health and environment.
f. There are no existing producing vertical/directional wells within the Unit boundary, however, any 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) are excluded from the proposed 3200-acre unit.
g. Any and all 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 included in the 3200-acre unit. There are five (5) existing horizontal wells within the URU – the Castor LC 25-72HN, the Castor LC 26-75HN, the Castor LC 27-72HN, the Castor LC 24-68HN, and the Castor LC 35-62HN.
h. 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.
15. 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 produced as a single formation, the Codell-Niobrara Formation.
16. Engineering testimony and exhibits submitted in support of the Application by Chandler Newhall, Senior Production Engineer for Noble, indicated that volumetric calculations of the Codell-Niobrara formation indicate that the estimated recovery factor of hydrocarbons under the Application Lands 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, and reduces surface disturbance in the URU. Testimony also illustrated that the economic calculations indicate that the NPV10 and rate of return values for vertical well development would be negative while and the horizontal lateral development is economic.
17. On April 22, 2014, the Bureau of Land Management (BLM) filed a Protest, objecting to the request to reduce setbacks from 600 to 300 feet.
18. On April 24, 2014, Noble and the BLM agreed to the following language with regard to exterior boundary setbacks:
a. The intrawell distance to be no closer than 150 feet from the productive interval of any other well bore producing from the Codell Formation and Niobrara Formation,
b. No well shall be closer than 600 feet from the southern section boundary of Section 35, Township 9 North, Range 59 West, 6th P.M. and the eastern section boundary of Section 25, Township 9 North, Range 59 West, 6th P.M. for the Codell Formation and Niobrara Formation,
c. No well shall be closer than 300 feet from the southern section line of Section 25, Township 9 North, Range 59 West, 6th P.M. and the eastern section line of Section 35, Township 9 North, Range 59 West, 6th P.M. for the Codell Formation and Niobrara Formation, and
d. With a further exception allowing for corresponding reciprocal setbacks of 300 feet along the northern section lines of Sections 25, 26, and 27, Township 9 North, Range 59 West, 6th P.M. the western section lines of Sections 27 and 34, Township 9 North, Range 59 West, 6th P.M., and the southern section line of Section 34, Township 9 North, Range 59 West, 6th P.M., upon application and approval of 300 foot boundary sections by the Commission for the southern section lines of Sections 22, 23, and 24, Township 9 North, Range 59 West, 6th P.M. the eastern section lines of Section 28 and 33, Township 9 North, Range 59 West, 6th P.M. and the northern section lines of Sections 3 and 4, Township 8 North, Range 59 West, 6th P.M. for the Codell Formation and Niobrara Formation, without exception being granted by Director.
19. Noble’s Application requested that the Codell-Niobrara Formation be used to describe the target formation. The position of COGCC technical staff, however, is the Codell-Niobrara Formation is not a geologically recognized formation within the Application Lands and, therefore, the terminology “Codell and Niobrara Formations” shall be used.
20. On April 28, 2014, the BLM conditionally withdrew its Protest.
21. 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.
22. Noble agreed to be bound by oral order of the Commission.
23. 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.
24. 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 five approximate 640-acre drilling and spacing units established by Order No. 535-3 for Sections 25, 26, 27, 34 and 35, Township 9 North, Range 59 West, 6th P.M.; 2) vacate pooling Order No. 535-257; 3) vacate pooling Order No. 535-282; 4) vacate pooling Order No. 535-434; and 5) establish an approximate 3,200-acre unconventional resource unit (“URU”) for Sections 25, 26, 27, 34, and 35, Township 9 North, Range 59 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations.
ORDER
IT IS HEREBY ORDERED:
1. Five approximate 640-acre drilling and spacing units established by Order No. 535-3 for Sections 25, 26, 27, 34 and 35, Township 9 North, Range 59 West, 6th P.M., are hereby vacated.
2. Order No. 535-257 is hereby vacated.
3. Order No. 535-282 is hereby vacated.
4. Order No. 535-434 is hereby vacated.
5. 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 and Niobrara Formations, 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 59 West, 6th P.M.
Section 25: ALL
Section 26: ALL
Section 27: ALL
Section 34: ALL
Section 35: ALL
6. With respect to the intrawell and unit boundary setbacks, the Commission ORDERS as follows:
a. The intrawell distance to be no closer than 150 feet from the productive interval of any other well bore producing from the Codell Formation and Niobrara Formation,
b. No well shall be closer than 600 feet from the southern section boundary of Section 35, Township 9 North, Range 59 West, 6th P.M. and the eastern section boundary of Section 25, Township 9 North, Range 59 West, 6th P.M. for the Codell Formation and Niobrara Formation,
c. No well shall be closer than 300 feet from the southern section line of Section 25, Township 9 North, Range 59 West, 6th P.M. and the eastern section line of Section 35, Township 9 North, Range 59 West, 6th P.M. for the Codell Formation and Niobrara Formation, and
d. With a further exception allowing for corresponding reciprocal setbacks of 300 feet along the northern section lines of Sections 25, 26, and 27, Township 9 North, Range 59 West, 6th P.M., the western section lines of Sections 27 and 34, Township 9 North, Range 59 West, , 6th P.M., and the southern section line of Section 34, Township 9 North, Range 59 West, 6th P.M., upon application and approval of 300 foot boundary sections by the Commission for the southern section lines of Sections 22, 23, and 24, Township 9 North, Range 59 West, 6th P.M., the eastern section lines of Section 28 and 33, Township 9 North, Range 59 West, 6th P.M., and the northern section lines of Sections 3 and 4, Township 8 North, Range 59 West, 6th P.M., for the Codell Formation and Niobrara Formation, without exception being granted by director.
7. 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.
8. 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.
9. Any existing horizontal wells 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.
10. This matter shall be set for review by the Commission in one year and annually thereafter, without exception being granted by the Commission.
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 23rd day of May, 2014, as of April 28, 2014.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary