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 NIOBRARA FORMATION, UNNAMED FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 535
DOCKET NO. 1409-SP-2104
ORDER NO. 535-529 |
REPORT OF THE COMMISSION
The Commission heard this matter on September 15, 2014, at the offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln St., Suite 801, Denver, CO, upon application for an order to: 1) vacate an approximate 640-acre drilling and spacing unit established by Order No. 535-418 for Section 34, Township 8 North, Range 60 West, 6th P.M.; and 2) establish an approximate 1280-acre drilling and spacing unit for Sections 27 and 34, Township 8 North, Range 60 West, 6th P.M., and approve up to eight horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.
FINDINGS
The Commission finds as follows:
1. Foundation Energy Fund III-A, L.P., Foundation Energy Fund III-B Holding, L.L.C., Foundation Energy Fund IV-A, L.P., and Foundation Energy Fund IV-B Holding, L.L.C., by and through Foundation Energy Management, L.L.C., as manager of each of these four entities (“Foundation” 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. Rule 318.a. of the Rules and Regulations of the Oil and Gas Conservation Commission requires that, on unspaced lands, wells drilled in excess of 2,500 feet in depth be located not less than 600 feet from any lease line, and located not less than 1,200 feet from any other producible or drilling oil or gas well when drilling to the same common source of supply. Section 27, Township 8 North, Range 60 West, 6th P.M. is subject to this Order for the Niobrara Formation.
5. On September 16, 2013, the Commission entered Order No. 535-418 which established an approximate 640-acre drilling and spacing unit for Section 34, Township 8 North, Range 60 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation. Section 34, Township 8 North, Range 60 West, 6th P.M. is subject to this Order for the Niobrara Formation.
5. On July 17, 2014 (amended August 8, 2014), Foundation, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116 C.R.S. for an order to: 1) vacate an approximate 640-acre drilling and spacing unit established by Order No. 535-418 for Section 34, Township 8 North, Range 60 West, 6th P.M.; and 2) establish an approximate 1280-acre drilling and spacing unit for Sections 34 and 27, Township 8 North, Range 60 West, 6th P.M., and approve up to eight horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation:
Township 8
North, Range 60 West, 6th P.M.
Section 27: All
Section 34: All
Applicant also requested that all proposed wells be located on no more than four drilling pads within the unit.
6. On August 29, 2014, Foundation and the Bureau of Land Management (“BLM”) reached an agreement wherein, if the BLM has not previously approved a Communitization Agreement ("CA") on the Application Lands, Foundation agrees to submit a CA to the BLM within 90 days of the spud of the first well, or within 60 days of the date of this Order if there is an existing well in the spaced formation, whichever applies first, in any drilling and spacing unit that contains leased or unleased Federal minerals. The Application Lands contain Federal minerals managed by the BLM.
7. On September 2, 2014, Foundation, 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.
8. Land testimony and exhibits submitted in support of the Application by Scott Ryan, Landman for Foundation, showed that Foundation holds oil and gas leasehold interests and has a right to drill in the Application Lands.
9. Geologic testimony and exhibits submitted in support of the Application by Meredith Smith, Geologist for Foundation, showed that the Niobrara Formation is present and productive in the Application Lands, is approximately 313 feet thick, and is generally of uniform thickness throughout the Application Lands. Further testimony showed an analysis of the Niobrara Formation structure; an isopach map showing the gross thickness of the Niobrara Formation across the Application Lands; and a type cross section of several wells in the vicinity of the Application Lands showing the vertical distribution of the A, B and C chalk benches within the Niobrara Formation.
10. Engineering testimony and exhibits submitted in support of the Application by Joseph Tyree, Reservoir Engineer for Foundation, showed that the calculated drainage area for analog horizontal Niobrara Formation wells with an ultimate recoverable reserve potential of 260 Mbo of oil and 208 MMCF of gas per unit is 154 acres. Further testimony concluded the economics of the project are sound.
11. 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.
12. Foundation agreed to be bound by oral order of the Commission.
13. 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: 1) vacate an approximate 640-acre drilling and spacing unit established by Order No. 535-418 for Section 34, Township 8 North, Range 60 West, 6th P.M.; and 2) establish an approximate 640-acre drilling and spacing unit for Sections 34 and 27, Township 8 North, Range 60 West, 6th P.M., and approve up to eight horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.
ORDER
IT IS HEREBY ORDERED:
1. An approximate 640-acre drilling and spacing unit established by Order No. 535-418 for Section 34, Township 8 North, Range 60 West, 6th P.M. is hereby vacated.
2. An approximate 1280-acre drilling and spacing unit for the below-described lands, is hereby established, and up to eight horizontal wells within the unit, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the productive interval of the wellbore will be located no closer than 600 feet from the unit boundaries, and no closer than 200 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 27: All
Section 34: All
3. The proposed wells shall be located on no more than four drilling pads within the unit.
4. If the BLM has not previously approved a Communitization Agreement ("CA") on the Application Lands, Foundation shall submit a CA to the BLM within 90 days of the spud of the first well, or within 60 days of the date of this Order if there is an existing well completed in the spaced formation, whichever applies first, in any drilling and spacing unit that contains Federal minerals managed by the BLM.
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 22nd day of September, 2014, as of September 15, 2014.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary