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, ADAMS COUNTY, COLORADO |
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CAUSE NO. 535
DOCKET NO. 170500296
TYPE: SPACING
ORDER NO. 535-848 |
REPORT OF THE COMMISSION
The Commission heard this matter on September 11, 2017, at the Durango Public Library, 1900 East Third Avenue, Durango, Colorado, upon application for an order to establish one approximate 640-acre drilling and spacing unit for the portions of Sections 8 and 9, Township 3 South, Range 65 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, and approve up to 16 horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.
FINDINGS
The Commission finds as follows:
1. Bison Oil & Gas, LLC (“Bison” or “Applicant”), Operator No. 10618, 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. Rule 318.a. of the Rules and Regulations of the Oil and Gas Conservation Commission requires that, on unspaced lands, wells drilled in excess of 2,500 feet in depth be located not less than 600 feet from any lease line, and located not less than 1,200 feet from any other producible or drilling oil or gas well when drilling to the same common source of supply. The Application Lands are subject to this Rule for the Niobrara Formation.
5. On March 2, 2017 (amended March 24, 2017), Bison, by its attorneys, filed with the Commission pursuant to §34-60-116, C.R.S., a verified application (“Application”) for an order 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 Niobrara Formation, with the productive interval of the wellbores to be located no closer than 150 feet from the productive interval of any other wellbore producing from the Niobrara Formation, and no closer than 460 feet from the unit boundary, unless an exception is granted by the Director:
Township 3 South, Range 65 West, 6th P.M.
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Section 9: W˝
6. Applicant stated that any horizontal wells to be drilled under this Application will be drilled from no more than three multi-well pads within the unit or lands adjacent thereto, unless the Director grants an exception.
7. On April 17, 2017 (Amended May 10, 2017), the City and County of Denver, on behalf of its Department of Aviation which owns and operates Denver International Airport (“DEN” or “Protestant”) filed a Protest filed a and a Motion to Dismiss the Application alleging that, if approved, DEN’s correlative rights will be harmed and its hydrocarbons drained as an adjacent owner to the unit. On August 31, 2017, DEN withdrew its protest to the Application.
8. On April 17, 2017, ConocoPhillips Company (“COPC”) filed a 510 statement and maintained that this area where the Application Lands are located has not yet been developed and requires more exploration and data analysis to ensure the appropriate number of wells in the appropriate size unit to have efficient and economic development. COPC stated that if approved, the 640-acre drilling and spacing unit with 16 horizontal wells would result in physical, hydrocarbon and economic waste.
9. On April 10, 2017 (supplemented and amended on August 29, 2017), Bison, 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 Robert Pierini, Senior Landman for Bison, showed Bison as the owner of a leasehold interest in the Application Lands.
11. Geologic testimony and exhibits submitted in support of the Application by Ian Hogan, Senior Geologist for Bison, showed a type log from the Conoco Phillips Tebo 29 1H well approximately one mile from the Application Lands, a subsea structure map, and an isopach map. The testimony showed that the Niobrara Formation is present throughout the Application Lands, is approximately 350 feet thick, and is generally of uniform thickness throughout the Application Lands. Further testimony showed that the Niobrara Formation is a sequence of chalks and marlstones and that the drainage area for analog horizontal Niobrara Formation wells is estimated at 76 acres, with a drainage width of 314 feet, and an approximate 1280-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by 16 horizontal wells.
12. Engineering testimony and exhibits submitted in support of the Application by David Gonzales, President and Chief Operating Officer for Bison, included an economic analysis that showed that Bison is planning to drill 16 horizontal wells in the Niobrara Formation and based on the offset wells with similar geology and with plug and perf methodology and EUR, ROR, NPV and years of payout, the anticipated economics are favorable for the 16 horizontal wells producing oil, gas and associated hydrocarbons from the Niobrara Formation.
13. 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.
14. Bison agreed to be bound by oral order of the Commission.
15. Based on the facts stated in the verified Application, having resolved all protests, and on the Hearing Officer review of the Application under Rule 511., the Commission should enter an order to establish one approximate 960-acre drilling and spacing unit for the portions of Sections 8 and 9, Township 3 South, Range 65 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, and approve up to 16 horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.
ORDER
IT IS HEREBY ORDERED:
1. An approximate 960-acre drilling and spacing unit for the below-described lands, is hereby established, and a total of 16 horizontal wells within the unit are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation:
Township 3 South, Range 65 West, 6th P.M.
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Section 9: W˝
2. The productive interval of any horizontal wellbore shall be no closer than 460 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, unless the Director grants an exception.
3. All wells permitted under this Order shall be drilled from no more than three multi-well pads within the Application Lands within the unit or lands adjacent thereto, 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 10th day of October 2017, as of September 11, 2017.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
James P. Rouse, Acting Secretary