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

 

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. 170100025

 

TYPE: POOLING

 

ORDER NO. 535-762

REPORT OF THE COMMISSION

 

The Commission heard this matter on January 30, 2017, 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 3,840-acre drilling and spacing unit established for Sections 10, 11, 14, 15, 22,  and 23, Township 9 North, Range 59 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 Earp Federal LC 23-735 Well, the Earp Federal LC 23-740 Well, the Earp Federal LC 23-745 Well, the Holliday Federal LC 23-775 Well, the Holliday Federal LC 23-780 Well, the Holliday Federal LC 23-785 Well, the Johnny Federal LC 11-715 Well, the Johnny Federal LC 11-725 Well, the Kramer Federal LC 22-720 Well, the Kramer Federal LC 22-725 Well, the Ringo Federal LC 23-720 Well, the Ringo Federal LC 23-725 Well, the Tombstone Federal LC 23-755 Well, the Tombstone Federal LC 23-760 Well, and the Tombstone Federal LC 23-765 Well, for the development and operation of the Codell and Niobrara Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Noble Energy, Inc. (Operator No. 100322) (“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 approximate 640-acre drilling and spacing units for Sections 10, 14, 15, 22, and 23, Township 9 North, Range 59 West, 6th P.M., and approved one horizontal well within the units, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

 

5.         On September 19, 2011, the Commission entered Order No. 535-69 which, among other things, established an approximate 640-acre drilling and spacing unit for Section 11, Township 9 North, Range 59 West, 6th P.M., and approved two horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

 

6.         On February 11, 2013, the Commission entered Order No. 535-265 which, among other things, approved up to six horizontal wells for the 640-acre drilling and spacing unit established for Section 15, Township 9 North, Range 59 West, 6th P.M., for production of oil, gas and associated hydrocarbons from the Niobrara Formation.

 

7.         On March 25, 2013, the Commission entered Order No. 535-287 which, among other things, pooled all interests in the 640-acre drilling and spacing unit established for Section 15, Township 9 North, Range 59 West, 6th P.M., effective as of the earlier of the date of the Application, or the date that any costs specified in C.R.S. §34-60-116(7)(b)(II) were first incurred for the drilling of the Castor 15-41-9-59 Well.

 

8.         On June 17, 2014, the Commission entered Order No. 535-496 which, among other things, modified Order No. 535-3 to allow 300 foot setbacks for the southern section lines of Sections 22 and 23, Township 9 North, Range 59 West, 6th P.M.

 

9.         On July 20, 2015, the Commission entered Order No. 535-681 which, among other things: (1) maintained the approximate 640-acre drilling and spacing units established by Order No. 535-3 for Sections 10, 22 and 23, Township 9 North, Range 59 West, 6th P.M., for production of existing oil, gas and associated hydrocarbons from the Niobrara Formation for the Timbro LC 10-72HN Well (API No. 05-123-33082), the Castor Federal LC 22-78HN Well (API No. 05-123-33080), and the Castor Federal LC 23-62HN Well (API No. 05-123-36392); (2) vacated the 640-acre drilling and spacing units established by Order No. 535-3 for Sections 14 and 15, Township 9 North, Range 59 West, 6th P.M.; (3) vacated an approximate 640-acre drilling and spacing unit established by Order No. 535-69 for Section 11, Township 9 North, Range 59 West, 6th P.M.; (4) vacated Order No. 535-265 as to Sections 11 and 15, Township 9 North, Range 59 West, 6th P.M.; (5) vacated Order No. 535-287 as to Section 15, Township 9 North, Range 59 West, 6th P.M.; and (6) established an approximate 3,840-acre drilling and spacing unit for Sections 10, 11, 14, 15, 22,  and 23, Township 9 North, Range 59 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations, and approved up to 56 horizontal wells within the unit, with the productive interval of the wellbores located no closer than 300 feet from the unit boundaries, and no closer than 150 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director.

 

10.       On November 28, 2016, Noble, 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 3,840-acre drilling and spacing unit established for the below-described lands (“Application Lands”), for the development and operation of the Codell and Niobrara Formations, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Earp Federal LC 23-735 Well (API No. 05-123-42941), the Earp Federal LC 23-740 Well (API No. 05-123-42942), the Earp Federal LC 23-745 Well (API No. 05-123-42940), the Holliday Federal LC 23-775 Well (API No. 05-123-42949), the Holliday Federal LC 23-780 Well (API No. 05-123-42950), the Holliday Federal LC 23-785 Well (API No. 05-123-42948), the Johnny Federal LC 11-715 Well (API No. 05-123-42944), the Johnny Federal LC 11-725 Well (API No. 05-123-42945), the Kramer Federal LC 22-720 Well (API No. 05-123-42939), the Kramer Federal LC 22-725 Well (API No. 05-123-42938), the Ringo Federal LC 23-720 Well (API No. 05-123-42943), the Ringo Federal LC 23-725 Well (API No. 05-123-42947), the Tombstone Federal LC 23-755 Well (API No. 05-123-42953), the Tombstone Federal LC 23-760 Well (API No. 05-123-42952), and the Tombstone Federal LC 23-765 Well (API No. 05-123-42951) (“Wells”):

 

Township 9 North, Range 59 West, 6th P.M.

Section 10:      All 

Section 11:      All

Section 14:      All

Section 15:      All

Section 22:      All

Section 23:      All  

 

11.       On January 9, 2017, 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.

 

12.       Land testimony and exhibits submitted in support of the Application by Charles A. Snure, Senior Staff Landman for Noble, 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 January 30, 2017 hearing date.

                                                 

13.       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 Earp Federal LC 23-735 Well, the Earp Federal LC 23-740 Well, the Earp Federal LC 23-745 Well, the Holliday Federal LC 23-775 Well, the Holliday Federal LC 23-780 Well, the Holliday Federal LC 23-785 Well, the Johnny Federal LC 11-715 Well, the Johnny Federal LC 11-725 Well, the Kramer Federal LC 22-720 Well, the Kramer Federal LC 22-725 Well, the Ringo Federal LC 23-720 Well, the Ringo Federal LC 23-725 Well, the Tombstone Federal LC 23-755 Well, the Tombstone Federal LC 23-760 Well, and the Tombstone Federal LC 23-765 Well, but did not provide testimony for any subsequent wells.

 

14.       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.

 

15.       Noble agreed to be bound by oral order of the Commission.

 

16.       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 3,840-acre drilling and spacing unit established for Sections 10, 11, 14, 15, 22,  and 23, Township 9 North, Range 59 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 Earp Federal LC 23-735 Well, the Earp Federal LC 23-740 Well, the Earp Federal LC 23-745 Well, the Holliday Federal LC 23-775 Well, the Holliday Federal LC 23-780 Well, the Holliday Federal LC 23-785 Well, the Johnny Federal LC 11-715 Well, the Johnny Federal LC 11-725 Well, the Kramer Federal LC 22-720 Well, the Kramer Federal LC 22-725 Well, the Ringo Federal LC 23-720 Well, the Ringo Federal LC 23-725 Well, the Tombstone Federal LC 23-755 Well, the Tombstone Federal LC 23-760 Well, and the Tombstone Federal LC 23-765 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 an approximate 3,840-acre drilling and spacing unit established 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 any of the costs specified in §34-60-116(7)(b)(II), C.R.S., are first incurred for the drilling of the Earp Federal LC 23-735 Well (API No. 05-123-42941), the Earp Federal LC 23-740 Well (API No. 05-123-42942), the Earp Federal LC 23-745 Well (API No. 05-123-42940), the Holliday Federal LC 23-775 Well (API No. 05-123-42949), the Holliday Federal LC 23-780 Well (API No. 05-123-42950), the Holliday Federal LC 23-785 Well (API No. 05-123-42948), the Johnny Federal LC 11-715 Well (API No. 05-123-42944), the Johnny Federal LC 11-725 Well (API No. 05-123-42945), the Kramer Federal LC 22-720 Well (API No. 05-123-42939), the Kramer Federal LC 22-725 Well (API No. 05-123-42938), the Ringo Federal LC 23-720 Well (API No. 05-123-42943), the Ringo Federal LC 23-725 Well (API No. 05-123-42947), the Tombstone Federal LC 23-755 Well (API No. 05-123-42953), the Tombstone Federal LC 23-760 Well (API No. 05-123-42952), and the Tombstone Federal LC 23-765 Well (API No. 05-123-42951):

 

Township 9 North, Range 59 West, 6th P.M.

Section 10:      All 

Section 11:      All

Section 14:      All

Section 15:      All

Section 22:      All

Section 23:      All  

 

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 Wells 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 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.  Any party seeking the cost recovery provisions of §34-60-116(7), C.R.S., shall first comply with subsection (d) 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 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 February, 2017, as of January 30, 2017.

           

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By____________________________________

Julie Murphy, Secretary