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

 

IN THE MATTER OF THE APPLICATION OF AXIA ENERGY, LLC FOR AN ORDER TO ESTABLISH AN APPROXIMATE 2537.82-ACRE UNCONVENTIONAL RESOURCE UNIT FOR SECTIONS 17, 18, 19 AND 20, TOWNSHIP 8 NORTH, RANGE 90 WEST, 6TH P.M., FOR THE MANCOS AND NIOBRARA FORMATIONS, UNNAMED FIELD, MOFFAT COUNTY, COLORADO

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CAUSE NO. 540

 

DOCKET NO. 1309-SP-1157

 

ORDER NO. 540-25

 

REPORT OF THE COMMISSION

 

            The Commission heard this matter on October 28, 2013, at the Limon Community Center, 477 D Avenue, Limon, Colorado, upon application for an order to establish an approximate 2537.82-acre unconventional resource unit, and approve an appropriate number of vertical, directional or horizontal wells in order to efficiently and economically recover the oil, gas and associated hydrocarbons from the proposed unit, for the production of oil, gas and associated hydrocarbons from Mancos and Niobrara Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.            Axia Energy, LLC (“Axia” 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. of the Rules and Regulations of the Oil and Gas Conservation Commission requires that 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.  Sections 17, 18, 19 and 20, Township 8 North, Range 90 West, 6th P.M. are subject to Rule 318.a. for the Mancos and Niobrara Formations.

 

5.         On July 18, 2013, Axia Energy, LLC (“Axia” or “Applicant”), by its attorneys, filed with the Commission, a verified application (“Application”) for an order to establish an approximate 2537.82-acre unconventional resource unit for the below-described lands (“Application Lands”), for the production of oil, gas and associated hydrocarbons from Mancos and Niobrara Formations, and approve an appropriate number of vertical, directional or horizontal wells in order to efficiently and economically recover the oil, gas and associated hydrocarbons from the proposed unit, with a limit of four multi-well pads per section within the Application Lands, or located on adjacent lands, with the productive interval of the wellbore to be located no closer than 600 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:

 

Township 8 North, Range 90 West, 6th P.M.

Section 17:      All        (Lots 1-16)

Section 18:      All        (Lots 5-20)

Section 19:      All        (Lots 5-20)

Section 20:      All        (Lots 1-16)

 

6.         On August 21, 2013, Axia requested, and Commission staff granted, a continuance to the October 28, 2013 hearing.

 

7.         On September 10, 2013, QEP Energy Company (“QEP” or “Protestant”), by its attorneys, filed a Protest in the matter alleging the size of the unit and the request for an “appropriate number of wells” violated the intent of the Oil and Gas Conservation Act, §34-60-116, C.R.S (“Conservation Act”).  QEP also alleged the Mancos and Niobrara Formations were discrete zones of a general structure, completely separated from each other, and should therefore be spaced as separate zones pursuant to §34-60-103(9), C.R.S., and that the proposed units are not reasonably reflective of the area that can be efficiently and economically drained by one well.

 

            8.         On September 25, 2013, Axia filed a Response to the Protest of QEP Energy Company stating, Axia’s intent was to space the Mancos and Niobrara Formations as distinct separate formations, with the proposed wells approved to produce from both formations.  Axia stated the size and configuration of the proposed units did not violate the intent of the Conservation Act and was supported by prior Commission approval of similarly sized URU’s.  Axia requested the Commission take Administrative notice of previously approved orders.  Axia also referenced §34-60-116(2), C.R.S. as the legal standard for spacing unit sizes.  Specifically that the standard for spacing unit sizes are such that, “the pool as a whole will be efficiently and economically developed, but no drilling unit shall be smaller than the maximum area that can be efficiently and economically drained by one well.” 

 

9.         On September 26, 2013 a prehearing conference (“PHC”) was held in this matter.

 

10.       On October 9, 2013, QEP withdrew its Protest in the matter.

 

11.       On October 10, 2013, a Rule 510 Statement was filed by the Rollins Investment Company.

 

12.       On October 10, 2013, a Rule 510 Statement was filed by the Michelle Smith, President of the National Association of Royalty Owners – Rockies Chapter.

 

13.       On October 15, 2013, Axia, 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.

 

14.       Land testimony and exhibits submitted in support of the Application by Tab McGinley, Vice President of Land for Axia, showed that Axia holds a mineral leasehold interest within the Application Lands.

 

15.       Geologic Testimony and exhibits submitted in support of the Application by Brian Berwick, Senior Geologist for Axia, showed an analysis of cross-sections from nearby Mancos and Niobrara Formations type wells, demonstrating the Mancos and Niobrara Formations underlies, and is generally of uniform thickness (3,850 feet) throughout the Application Lands. 

 

16.       Engineering Testimony and exhibits submitted in support of the Application by Taryn Frenzel, Senior Completions Engineer for the Sand Wash Team for Axia, showed the use of horizontal wells in the Application Lands is necessary to increase the recovery of hydrocarbons from the reservoir and minimize surface disturbances.  Further testimony showed the estimated ultimate recovery of hydrocarbons (“EUR”) with a 20% recovery factor and a 9,000 foot horizontal lateral would produce approximately 219 MBO of oil and 7.3 BCF of gas per well.  Testimony concluded the project is efficient and economic. 

 

17.       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.

 

18.       Axia agreed to be bound by oral order of the Commission. 

 

19.       The Commission requested that this matter be set for review by the Commission in one year and annually thereafter, without exception being granted by the Commission.

 

20.       Based on the facts stated in the verified Application, having resolved all protests, and upon a hearing before the Commission, the Commission may enter an order to establish an approximate 2537.82-acre unconventional resource unit, and approve an appropriate number of vertical, directional or horizontal wells in order to efficiently and economically recover the oil, gas and associated hydrocarbons from the proposed unit, for the production of oil, gas and associated hydrocarbons from Mancos and Niobrara Formations.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.         An approximate 2537.82-acre unconventional resource unit for the below-described lands, is hereby established, for the production of oil, gas and associated hydrocarbons from Mancos and Niobrara Formations, and an appropriate number of vertical, directional or horizontal wells, are hereby approved, in order to efficiently and economically recover the oil, gas and associated hydrocarbons from the proposed unit, with a limit of four multi-well pads per section within the Application Lands, or located on adjacent lands, with the productive interval of the wellbore to be located no closer than 600 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:

 

Township 8 North, Range 90 West, 6th P.M.

Section 17:      All        (Lots 1-16)

Section 18:      All        (Lots 5-20)

Section 19:      All        (Lots 5-20)

Section 20:      All        (Lots 1-16)

 

2.         This matter shall be set for review by the Commission in one year and annually thereafter, without exception being granted by the Commission.

 

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 30 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   20th   day of November, 2013, as of October 28, 2013.

           

 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary