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. 161000465
ORDER NO. 535-749
TYPE: POOLING |
REPORT OF THE COMMISSION
The Commission heard this matter on October 24, 2016, at the Northeastern Junior College, Hayes Student Center Ballroom, 100 College Avenue, Sterling, Colorado, upon application for an order to pool all interests within an approximate 960-acre drilling and spacing unit established for portions of Sections 8 and 17, 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 drilling of the Razor 08E-1704 Well, for the development and operation of the Niobrara Formation.
FINDINGS
The Commission finds as follows:
1. Whiting Oil and Gas Corporation (Operator No. 96155) (“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 October 1, 2012, the Commission entered Order No. 535-204, which established six 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. The Application Lands are subject to this Order.
5. On April 28, 2014, the Commission entered Order No. 535-471, which approved up to a total of sixteen horizontal wells within each of five approximate 960-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Niobrara Formation. The Application Lands are subject to this Order for the Niobrara Formation.
6. On October 27, 2014, the Commission entered Order No. 535-553, which amended Order Nos. 535-314, 535-471, 535-482, and 535-504 to include the Codell Formation and approved a total of up to thirty-two horizontal wells within the established 960-acre drilling and spacing units for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations. The Application Lands are subject to this Order for the Niobrara and Codell Formations.
7. On September 8, 2016, Whiting, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., 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, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Razor 08E-1704 Well (API No. 05-123-41491) (“Well”):
Township 10 North, Range 57 West, 6th P.M.
Section 8: S½
Section 17: All
8. The Application also requested that: 1) for any other well authorized under Commission Order No. 535-553, 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 35-day notice period provided by Commission Rule 530, then such owner shall be deemed nonconsenting as to the proposed well and subject to the cost recovery provisions of Section 34-60-116(7), C.R.S., but only if the proposed well is commenced no later than ninety (90) days after the expiration of the 35-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. If a proposed well is not commenced prior to or within ninety (90) days after expiration of the thirty-five (35) day notice period (including any extension thereof caused by force majeure) and completed with due diligence, then written notice proposing such well must be resubmitted to all parties in accordance with Commission Rule 530 as if no prior proposal had been made, and the parties shall have a new 35-day period within which to lease or consent to participate in such well; and 2) that Applicant not be required to submit any future application or certification to the Commission to obtain cost recovery under Section 34-60-116(7), C.R.S., for any other well authorized under Commission Order No. 535-553.
9. On October 3, 2016, Applicant, 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 Michelle Murphy, Land Technicon for Whiting, showed that all nonconsenting interest owners were notified of the Application and received Authority for Expenditures ("AFEs") and offers to participate in the Wells. Further testimony concluded that the AFEs sent by the Applicant to the interest owners were fair and reasonable estimates of the costs of the proposed drilling operations and were received at least 35 days prior to the October 24, 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 Razor 08E-1704 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. Whiting 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 in an approximate 960-acre drilling and spacing unit established for portions of Sections 8 and 17, 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 drilling of the Razor 08E-1704 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 an 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)(II), C.R.S., are first incurred for the drilling of the Razor 08E-1704 Well (API No. 05-123-41491):
Township 10 North, Range 57 West, 6th P.M.
Section 8: S½
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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 each of 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 paragraph 7, below, 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. In order for Applicant to obtain cost recovery under Section 34-60-116(7), C.R.S., for any other Niobrara Formation well authorized under Commission Order No. 535-553 for the Application Lands, Applicant will file a notarized certification to the Commission in this Docket Number that it has complied with Rule 530 for any such well and that the proposed well was spudded no later than ninety (90) days after the expiration of the 35-day notice period and will be completed with due diligence. The certification must identify all parties that received the Rule 530 information for the well, include a copy of the Rule 530 information provided, identify the parties to which cost recovery applies, be filed within 10 days after the later of spudding the well or the expiration of the 35-day notice period, and certify that a copy of the notarized certification was served, by sending it first class U.S. Mail, on all non-consenting parties for which Applicant seeks cost recovery. If a proposed well is not spudded prior to or within ninety (90) days after expiration of the thirty-five (35) day notice period and completed with due diligence, then Applicant will resubmit the written notice proposing such well to all parties in accordance with Rule 530 as if no prior proposal had been made, and the parties shall have a new 35-day period within which to lease or elect to participate in such well.
8. 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.
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 8th day of November, 2016, as of October 24, 2016.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Julie Murphy, Secretary