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. 170500239

 

TYPE:  SPACING

 

ORDER NO. 535-784

REPORT OF THE COMMISSION

 

The Commission heard this matter on May 1, 2017, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado upon application for an order to establish an approximate 1,280-acre drilling and spacing unit for Sections 8 and 17, Township 11 North, Range 61 West, 6th P.M., and approve up to 12 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Extraction Oil & Gas LLC (Operator No. 10459) (“Extraction” or “Applicant”) 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. provides that for any oil or gas well drilled to a common source of supply and drilled to a producing depth at least 2,500 feet below ground surface shall be located not less than 600 feet from any lease line and not less than 1,200 feet from any other producing or drilling oil or gas well when drilling to the same source of supply, unless authorized by Commission order upon hearing.  Section 8, Township 11 North, Range 61 West, 6th P.M., is subject to this Rule for the production of oil and gas from the Codell and Niobrara Formations.

 

5.         On January 23, 2012, the Commission issued Order No. 535-121 which, among other things, established an approximate 640-acre exploratory drilling unit for Section 17, Township 11 North, Range 61 West, 6th P.M., and authorized the drilling of one or more horizontal wells and one or more vertical wells within said unit, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations, with the treated interval of any permitted well located no closer than 600 feet from the unit boundaries.

 

6.         On March 24, 2017, Extraction, by its attorneys, filed with the Commission a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to: 1) establish an approximate 1,280-acre drilling and spacing unit for the below-described lands (“Application Lands”) and approve up to 12 horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations, with the productive interval of the wellbore to be located no closer than 300 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, without exception being granted by the Director; and 2) modify allocation of proceeds for the existing unconventional DF Ranch PC GK 17-99HZ Well (API No. 05-123-31976),drilled and producing within the Section 17, Township 11 North, Range 61 West, 6th P.M., by modifying Order No. 535-121 to bring said well into the 1,280-acre drilling and spacing unit proposed herein for the Application Lands, effective the initial date of completion operations associated with the first well completed under the approved Application:

 

Township 11 North, Range 61 West, 6th P.M.

Section   8:      All

Section 17:      All

 

7.         Applicant states that any horizontal wells to be drilled under this Application will be drilled from no more than two multi-well pads within the drilling and spacing unit, or on adjacent lands with surface owner consent, without exception being granted by the Director.

 

8.         On April 10, 2017, supplemented April 18, 2017, Extraction, 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 Sean Flanagan, Landman for Extraction, showed that Extraction holds oil and gas leasehold interests and has a right to drill in the Application Lands.

 

10.       Land testimony further showed that 8 North LLC (Operator No. 10575) presently operates the DF Ranch 1161-8-14 Well (API No. 05-123-31105), a vertical well with a bottom-hole location in the SE¼NE¼ of Section 8, Township 11 North, Range 61 West, 6th P.M., and allocates production on an 40-acre leasehold basis designating the SE¼NE¼ of Section 8, Township 11 North, Range 61 West, 6th P.M., that existing conventional wells producing from the Codell or Niobrara Formations underlying the Application Lands should be excluded from the approximate 1,280-acre drilling and spacing unit proposed herein for the Application Lands, and that the allocation of proceeds from the DF Ranch 1161-8-14 well should continue to pay on its current 40-acre leasehold basis.

 

11.       Land testimony further showed that 8 North LLC (Operator No. 10575) presently operates the DF Ranch PC GK 17-99HZ Well (API No. 05-123-31976), a Niobrara Formation horizontal well running diagonally from its surface location in the NW¼NW¼ of Section 17, Township 11 North, Range 61 West, 6th P.M., to its bottom-hole location in the SE¼SE¼ of Section 17, Township 11 North, Range 61 West, 6th P.M., and currently allocates production on a 640-acre unit basis pursuant to Commission Order No. 535-121. In addition, land testimony was that the DF Ranch PC GK 17-99HZ Well should be brought into the 1,280-acre drilling and spacing unit proposed for the Application Lands, as of the initial date of completion operations associated with the first well completed under the approved Application, changing allocation of production to an approximate 1,280-acre unit basis.

 

12.       Geologic testimony and exhibits submitted in support of the Application by Alicia Branch, Geologic Consultant for Extraction, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 295 to 300 feet thick, and is generally of uniform thickness throughout the Application Lands.  Further testimony showed that the Niobrara Formation is a sequence of chalks, marls and limestones and is a common source of supply.  Geologic testimony also showed that the Codell Formation is present throughout the Application Lands, is approximately 19 to 21 feet thick, and is generally of uniform thickness throughout the Application Lands. Further testimony showed that the Codell Formation is made up of sandstone and is a common source of supply. 

 

13.       Engineering testimony and exhibits submitted in support of the Application by Boyd McMaster, Petroleum Engineer for Extraction, showed that the drainage area for analog horizontal Niobrara Formation wells are estimated at 96 acres, and an approximate 1,280-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by a horizontal well producing oil, gas and associated hydrocarbons from the Niobrara Formation. Engineering testimony also showed that the drainage area for analog horizontal Codell Formation wells are estimated at 272 acres, and an approximate 1,280-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by a horizontal well producing oil, gas and associated hydrocarbons from the Codell Formation.

 

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.       Extraction 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 establish an approximate 1,280-acre drilling and spacing unit for Sections 8 and 17, Township 11 North, Range 61 West, 6th P.M., and approve up to 12 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations.

 

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.         An approximate 1,280-acre drilling and spacing unit for the below-described lands is hereby established, and a total of up to 12 horizontal wells within the unit are hereby approved, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations:

 

Township 11 North, Range 61 West, 6th P.M.

Section   8:      All

Section 17:      All

 

2.         The productive interval of the wellbore will be located no closer than 300 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore producing from the same source of supply within the unit, unless the Director grants an exception.

 

3.         All wells permitted under this Order shall be drilled from no more than two multi-well pads within the Application Lands, or on adjacent lands with surface owner consent, unless the Director grants an exception.

 

4.         Order No. 535-121 is hereby amended to provide that it is applicable only to the DF Ranch PC GK 17-99HZ Well (API #05-123-31976).  No additional wells shall be drilled in the approximate 640-acre unit created by Order No. 535-121.  The DF Ranch PC GK 17-99HZ Well shall continue paying to the approximate 640-acre exploratory spacing unit created by Order No. 535-121 until the date of commencement of completion operations on the first horizontal well approved by this Order, at which time it will be brought into the approximate 1,280-acre drilling and spacing unit created by this Order.  Upon bringing the DF Ranch PC GK 17-99HZ Well into the approximate 1,280-acre drilling and spacing unit created by this Order, Order No. 535-121 shall be deemed vacated.

 

5.         The DF Ranch 1161-8-14 Well (API No. 05-123-31105) is excluded from the approximate 1,280-acre drilling and spacing unit created by this order and shall continuing paying on its current leasehold basis.

 

            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 10th day of May, 2017, as of May 1, 2017.

           

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By____________________________________

Peter Gowen, Acting Secretary