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. 160800346
ORDER NO. 535-736
TYPE: POOLING
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REPORT OF THE COMMISSION
The Commission heard this matter on August 29, 2016, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to pool all interests within an approximate 1286.95-acre drilling and spacing unit, established by Order Nos. 535-335 and 535-478 for Section 5, Township 9 North, Range 58 West, 6th P.M., for the drilling of the Heston LD06-620 Well, the Heston LD06-625 Well, the Heston LD06-630 Well, the Nugent LD06-655 Well, the Nugent LD06-665 Well, the Reagan LD06-675 Well, and the Reagan LD06-685 Well, for the development and operation of the Codell and Niobrara Formations.
FINDINGS
The Commission finds as follows:
1. Noble Energy, Inc. (“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, among other things, established 160 approximate 640-acre drilling and spacing units, including the Application Lands, and approved one horizontal well within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.
5. On May 6, 2013, the Commission entered Order No. 535-335 which, among other things, vacated two approximate 640-acre drilling and spacing units established by Order No. 535-3 for Sections 5 and 6, Township 9 North, Range 58 West, 6th P.M., and established an approximate 1280-acre drilling and spacing unit consisting of the above-described lands, and approved one horizontal well within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.
6. On April 28, 2014, the Commission entered Order No. 535-478 which, among other things, modified the approximate 1286.95-acre drilling and spacing unit established by Order No. 535-335 to establish the Codell and Niobrara Formations as spaced formations and approved up to 14 horizontal wells within the unit.
7. On January 27, 2016, the Commission entered Order No. 535-722 which, among other things, modified Order No. 535-478 to allow for 300-foot setbacks for the southern boundary of the unit established for the Application Lands, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations.
8. On June 30, 2016, Noble, 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, including any non-consenting interests, within the approximate 1286.95-acre drilling and spacing unit for the below-described lands (“Application Lands”), for the drilling of the Wells, for the development and operation of the Codell and Niobrara Formations, effective as of the earlier of the date of the Application or the date that the costs specified in § 34-60-116(7)(b), C.R.S., are first incurred for the drilling of the Heston LD06-620 (API No. 05-123-40816), the Heston LD06-625 (API No. 05-123-40813), the Heston LD06-630 (API No. 05-123-40815), the Nugent LD06-655 (API No. 05-123-40812), the Nugent LD06-665 (API No. 05-123-40808), the Reagan LD06-675 (API No. 05-123-40819), and the Reagan LD06-685 (API No. 05-123-40818) (collectively, the “Wells”):
Township 9 North, Range 58 West, 6th P.M.
Section 5: All
Section 6: All
9. On August 8, 2016, 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.
10. Land testimony and exhibits submitted in support of the Application by Charles A. Snure, Senior Advisor Staff Landman for Noble, showed that all non-consenting interest owners were notified of the Application and received an Authority for Expenditure ("AFE") and offer to participate in the Wells. 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 35 days prior to the August 29, 2016 hearing date.
11. 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 Heston LD06-620 Well, the Heston LD06-625 Well, the Heston LD06-630 Well, the Nugent LD06-655 Well, the Nugent LD06-665 Well, the Reagan LD06-675 Well, and the Reagan LD06-685 Well, but did not provide testimony for any subsequent wells.
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. Noble agreed to be bound by oral order of the Commission.
14. 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 1286.95-acre drilling and spacing unit established by Order No. 535-335 and 535-478 for Section 5, Township 9 North, Range 58 West, 6th P.M., for the drilling of the Heston LD06-620 Well, the Heston LD06-625 Well, the Heston LD06-630 Well, the Nugent LD06-655 Well, the Nugent LD06-665 Well, the Reagan LD06-675 Well, and the Reagan LD06-685 Well, for the development and operation of the Codell and Niobrara Formations.
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 1286.95-acre drilling and spacing unit for the below-described lands are hereby pooled, for the development and operation of the Codell and Niobrara Formations, effective as of the earlier of the date of the Application or the date that the costs specified in §34-60-116(7)(b), C.R.S., are first incurred for the drilling of the Heston LD06-620 (API No. 05-123-40816), the Heston LD06-625 (API No. 05-123-40813), the Heston LD06-630 (API No. 05-123-40815), the Nugent LD06-655 (API No. 05-123-40812), the Nugent LD06-665 (API No. 05-123-40808), the Reagan LD06-675 (API No. 05-123-40819), and the Reagan LD06-685 (API No. 05-123-40818) (collectively, the “Wells”)
Township 9 North, Range 58 West, 6th P.M.
Section 5: All
Section 6: All
2. The production obtained from the drilling and spacing unit shall be allocated to each owner in the units 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 Wells located on the drilling and spacing unit applicable to its interest in the drilling and spacing unit.
3. The nonconsenting owners must reimburse the consenting working interest owners for their share of the costs and risks of drilling and operating the Wells (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 Wells and be subject to the penalties as provided for by §34-60-116(7), C.R.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 Wells, surface facilities and production, and then be liable for its proportionate share of further costs incurred in connection with the Wells as if it had originally agreed to the drilling.
6. The operator of the Wells 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. Nothing in this order is intended to conflict with §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 1st day of September 2016, as of August 29, 2016.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Julie Murphy, Secretary