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

 

REPORT OF THE COMMISSION

The Commission heard this matter on September 14, 2015, at Western State Colorado University, 600 North Adams Street, Gunnison, Colorado, upon application for an order to: 1) vacate Order No. 535-333 which pooled all interests in an approximate 640-acre drilling and spacing unit established for Section 15, Township 7 North, Range 60 West, 6^th P.M.; 2) vacate an approximate 640-acre drilling and spacing unit established by Order No. 535-324 for Section 15, Township 7 North, Range 60 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation; 3) establish an approximate 1280-acre drilling and spacing unit for Sections 14 and 15, Township 7 North, Range 60 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations; and 4) approve up to twenty-eight horizontal wells within the unit, with twenty-four horizontal wells to be drilled to the Niobrara Formation and four horizontal wells to be drilled to the Codell Formation, for the production of oil, gas, and associated hydrocarbons of the Codell and Niobrara Formations.

FINDINGS

The Commission finds as follows:

1.         Caerus WashCo LLC (“Caerus” 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 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 14, Township 7 North, Range 60 West, 6^th P.M. is subject to this Rule for the Niobrara and Codell Formations. Section 15, Township 7 North, Range 60 West, 6^th P.M. is subject to this Rule for the Codell Formation.

 

5.         On May 6, 2013, the Commission entered Order 535-324 which, among other things, established an approximate 640-acre drilling and spacing unit for certain lands, including portions of the Application Lands, and approved up to four horizontal wells within the unit, with bottomhole locations of any permitted well to be no closer than 600 feet from the boundary of the unit, and no closer than 150 feet from the productive interval of any other wellbore, for the production of oil and gas and associated hydrocarbons from the Niobrara Formation.  Section 15, Township 7 North, Range 60 West, 6^th P.M. is subject to this Order for the Niobrara Formation.

6.         On May 6, 2013, the Commission entered Order 535-333 which, among other things, pooled all interests in the approximate 640-acre drilling and spacing unit established under Order No. 535-324.  Section 15, Township 7 North, Range 60 West, 6^th P.M. is subject to this Order for the Niobrara Formation.

7.         On May 21, 2015, Caerus, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to 1) vacate Order No. 535-333 which pooled all interests in an approximate 640-acre drilling and spacing unit established for Section 15, Township 7 North, Range 60 West, 6^th P.M.; 2) vacate an approximate 640-acre drilling and spacing unit established by Order No. 535-324 for Section 15, Township 7 North, Range 60 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation; 3) establish an approximate 1280-acre drilling and spacing unit for the below-described lands (“Application Lands”), for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations; and 4) approve up to twenty-eight horizontal wells within the unit, with twenty-four horizontal wells to be drilled to the Niobrara Formation and four horizontal wells to be drilled to the Codell Formation, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations, with the productive interval of each wellbore located no closer than 600 feet from the unit boundaries, and no closer than 100 feet from the productive interval of any other wellbore located within the unit, without exception being granted by the Director:

Township 7 North, Range 60 West, 6^th P.M.

Section 14:  All
Section 15:  All

Applicant also requests that the proposed wells be located on no more than four wellpads within the unit or on adjacent lands, without exception granted by the Director.

8.         On June 29, 2015 (supplemented September 4, 2015), Caerus, 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.

9.         Land testimony and exhibits submitted in support of the Application by Jeff Grisham, Landman for Caerus showed that Caerus owns a substantial leasehold interest and is an owner with the right to drill wells in the Application Lands.

10.       Geologic testimony and exhibits submitted in support of the Application by Lisa Gusek, Petroleum Geologist for Caerus, showed the Niobrara and Codell Formations are present, uniform, and are a common source of supply throughout the Application Lands. Testimony further showed that the Niobrara Formation has an average thickness of 292 - 302 feet and the Codell Formation has an average thickness of 10 feet across the Application Lands.

11.       Engineering testimony and exhibits submitted in support of the Application by Jeffery Baldauf, Reservoir Engineering Manager for Caerus, showed that the estimated drainage area for eight wells located in each of the A, B and C Benches of the Niobrara Formation would be approximately 52 acres. Testimony concluded the drilling, completion, and production of horizontal Niobrara and Codell wells requested in the Application for the Application Lands, will increase recovery from the reservoir and thereby prevent waste, will protect correlative rights, and can be done economically and efficiently.

12.       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.

13.       Caerus agreed to be bound by oral order of the Commission. 

14.       On June 30, 2015, Schneider Oil and Gas, LLC, Rival Energy, LLC (collectively “Schneider Group” or “Protestant”) filed a Protest to the Application alleging the proposed development made by Caerus adversely affects the Schneider Group’s correlative rights and its rights to recover and receive its just and equitable share of oil and gas in the 320-acre area in Section 14, Township 7 North, Range 60 West, 6^th P.M.

15.       On July 9, 2015, Caerus filed a Motion to Dismiss the Protest.  A response to the Motion was filed on July 13, 2015. The Motion to Dismiss was denied on July 14, 2015.

16.       On July 15, 2015, Staff continued the matter to the September hearing.

17.       On September 4, 2015, the Hearing Officer issued a Hearing Officer Recommendation.

18.       On September 11, 2015, Schneider withdrew its protest to the Application.

19.       Based on the facts stated in the verified Application, having resolved the protest, and based on the Hearing Officer review of the Application under Rule 511, the Commission should enter an order to: 1) vacate Order No. 535-333 which pooled all interests in an approximate 640-acre drilling and spacing unit established for Section 15, Township 7 North, Range 60 West, 6^th P.M.; 2) vacate an approximate 640-acre drilling and spacing unit established by Order No. 535-324 for Section 15, Township 7 North, Range 60 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation; 3) establish an approximate 1280-acre drilling and spacing unit for Sections 14 and 15, Township 7 North, Range 60 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations; and 4) approve up to twenty-eight horizontal wells within the unit, with twenty-four horizontal wells to be drilled to the Niobrara Formation and four horizontal wells to be drilled to the Codell Formation, for the production of oil, gas, and associated hydrocarbons of the Codell and Niobrara Formations.

 

ORDER

IT IS HEREBY ORDERED:

1.            Order No. 535-333, which pooled all interests in an approximate 640-acre drilling and spacing unit established for Section 15, Township 7 North, Range 60 West, 6^th P.M., is hereby vacated.

2.            An approximate 640-acre drilling and spacing unit established by Order No. 535-324 for Section 15, Township 7 North, Range 60 West, 6^th P.M., is hereby vacated, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

3.            An approximate 1280-acre drilling and spacing unit is hereby established, for the below described lands and up to 28 horizontal wells within the unit, and 24 horizontal wells to be drilled to the Niobrara Formation and four horizontal wells to be drilled to the Codell Formation, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations:

Township 7 North, Range 60 West, 6^th P.M.

Section 14:  All
Section 15:  All

4.         The productive interval of any wellbore shall be located no closer than 100 feet from any other wellbore producing from the Codell and Niobrara Formations, and no closer than 600 feet from the unit boundaries, unless an exception is granted by the Director.

5.         The proposed wells shall be located be located on no more than four wellpads within the unit or on adjacent lands, unless an exception is 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 28th day of September, 2015, as of September 14, 2015.

CORRECTED this 8^th day of October, 2015, as of September 14, 2015.

           

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

                                                                        By____________________________________       

                                                                                    Julie Murphy, Secretary