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 AND CODELL FORMATIONS, UNNAMED FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 535
DOCKET NO. 170600357
TYPE: SPACING
ORDER NO. 535-822 |
REPORT OF THE COMMISSION
The Commission heard this matter on June 12, 2017, at the Rio Blanco County Courthouse, 555 Main Street, Meeker, Colorado upon application for an order to: 1) amend Order No. 535-476 to establish an approximate 960-acre drilling and spacing unit for Sections 28 and 29, Township 11 North, Range 57 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Codell Formation; 2) amend Order No. 535-476 to allow the location of the productive interval of any wellbore to be located no closer than 300 feet from the productive interval of any other wellbore located in the drilling and spacing unit, and no closer than 300 feet from the unit boundaries, without exception being granted by the Director; and 3) approve up to 16 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.
FINDINGS
The Commission finds as follows:
1. Carrizo Oil & Gas, Inc. (Operator No. 10338) and Carrizo (Niobrara) LLC (Operator No. 10439) (together, “Carrizo” or “Applicant”) are interested parties 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 March 28, 2013, the Commission entered Order No. 535-267, which, among other things, established an approximate 960-acre drilling and spacing unit for all of Section 21 and the N˝ of Section 28, Township 11 North, Range 57 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara formation, and approved up to four horizontal wells within the unit.
5. On May 16, 2014, the Commission entered Order No. 535-476, which, among other things, vacated the approximate 960-acre drilling and spacing unit inclusive of Section 28, Township 11 North, Range 57 West, 6th P.M., established by Order No. 535-267, and, among other things, established an approximate 960-acre drilling and spacing unit for All of Section 28 and the E˝ of Section 29, Township 11 North, Range 57 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation, and approved up to 16 horizontal wells within the unit.
6. On April 13, 2017, Carrizo, by its attorneys, filed with the Commission a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to: 1) amend Order No. 535-476 to establish an approximate 960-acre drilling and spacing unit for the below described lands (“Application Lands”), for the production of oil, gas, and associated hydrocarbons from the Codell Formation; 2) amend Order No. 535-476 to allow the location of the productive interval of any wellbore to be located no closer than 300 feet from the productive interval of any other wellbore located in the drilling and spacing unit, and no closer than 300 feet from the unit boundaries, without exception being granted by the Director; and 3) approve up to 16 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations:
Township 11 North, Range 57 West, 6th P.M.
Section 28: All
Section 29: E˝
7. Applicant stated that the wells would be drilled from no more than four multi-well pads located on the Application lands, unless an exception is granted by the Director.
8. On May 22, 2017, Carrizo, 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 Damian Katz, Landman for Carrizo, showed that Carrizo holds oil and gas leasehold interests and has a right to drill in the Application Lands. Land testimony further stated that any horizontal wells to be drilled under this Application will be drilled from no more than four multi-well pads located on the Application Lands, or lands adjacent thereto, without exception being granted by the Director.
10. Geologic testimony and exhibits submitted in support of the Application by Lindsay Aldrich, Geologist for Carrizo, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 360 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 15 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.
11. Engineering testimony and exhibits submitted in support of the Application by Thomas White, Operations Engineer for Carrizo, showed that the drainage area for analog horizontal Niobrara Formation wells are estimated at 54.09 acres, and an approximate 960-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 181.74 acres, and an approximate 960-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.
12. Engineering testimony, based on both drainage calculations and frac modeling, showed that 300 feet is the proper minimum setback between wellbores to maximize resource recovery, prevent waste and protect correlative rights.
13. The Application Lands contain federal minerals and are subject to Communitization Agreement COC78231 for the Niobrara Formation. As such, Carrizo agreed to file for an amendment of Communitization Agreement COC78231 for the inclusion of the Codell Formation within 90 days of approval of the Application by the Commission.
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. Carrizo 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 order to: 1) amend Order No. 535-476 to establish an approximate 960-acre drilling and spacing unit for Sections 28 and 29, Township 11 North, Range 57 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Codell Formation; 2) amend Order No. 535-476 to allow the location of the productive interval of any wellbore to be located no closer than 300 feet from the productive interval of any other wellbore located in the drilling and spacing unit, and no closer than 300 feet from the unit boundaries, without exception being granted by the Director; and 3) approve up to 16 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.
ORDER
IT IS HEREBY ORDERED:
1. Order No. 535-476 is hereby amended to provide that an approximate 960-acre drilling and spacing unit for the below-described lands is hereby established, and a total of up to 16 horizontal wells within the unit are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations:
Township 11 North, Range 57 West, 6th P.M.
Section 28: All
Section 29: E˝
2. Order No. 535-476 is hereby further amended to provide that the productive interval of the wellbore producing from the Niobrara or Codell Formation will be located no closer than 300 feet from the unit boundaries, and no closer than 300 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 four multi-well pads within the Application Lands, or on adjacent lands, unless the Director grants an exception.
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 21st day of June, 2017, as of June 12, 2017.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Peter Gowen, Acting Secretary