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, MOFFAT COUNTY, COLORADO |
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CAUSE NO. 540
DOCKET NO. 160300105
TYPE: SPACING
ORDER NO. 540-61
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REPORT OF THE COMMISSION
The Commission heard this matter on April 18, 2016, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to establish an approximate 452.97-acre drilling and spacing unit for Sections 27 and 28, Township 5 North, Range 90 West, 6th P.M., and approve the existing horizontal well drilled within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.
FINDINGS
The Commission finds as follows:
1. GRMR Oil & Gas, LLC (Operator No. 10524) (“GRMR” 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, 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.
5. On January 5, 2016, GRMR, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to establish an approximate 452.97-acre drilling and spacing unit for the below-described lands (“Application Lands”) and to approve the Searcy Gulch 1-27 Well (API No. 05-081-07719) (“Well”) that is currently drilled in the proposed unit for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the productive interval of the wellbore to be located no closer than 600 feet from the unit boundaries, without exception granted by the Director:
Township 5 North, Range 90 West, 6th P.M.
Section 27: Lots 1, 2, 3, 5, 6, SW¼NE¼, S½NW¼, N½SW¼
Section 28: E½ of Lot 4, E½NE¼SE¼
6. On February 12, 2016, GRMR, 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.
7. On March 1, 2016, GRMR, by its attorneys, and the Bureau of Land Management (“BLM”) agreed that the Application Lands contain federal minerals. As such, GRMR agreed to submit a Communitization Agreement to the BLM for any existing wells within 60 days of the entry of this order. GRMR also agreed to submit a Communitization Agreement to the BLM at least 90 days before the anticipated date of first production (as defined in the Commission’s Rules) from the initial well drilled within the drilling and spacing unit for the Application Lands.
8. Land testimony and exhibits submitted in support of the Application by Scott Hoenmans, Land Manager for GRMR, showed that GRMR holds oil and gas leasehold interests and has a right to drill in the Application Lands.
9. Geologic testimony and exhibits submitted in support of the Application by Lyman A. Rudolph, Staff Geologist for GRMR, showed that the Niobrara Formation is present throughout the Application Lands and is approximately 350 to 450 feet thick, and is generally of uniform thickness throughout the Application Lands.
10. Engineering testimony and exhibits submitted in support of the Application by Lewis S. Wandke, Senior Project Engineer for Petrotek Engineering Corporation, showed that the calculated drainage area for the Well is estimated at 0.085 acres, and an approximate 452.97-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by the existing horizontal well producing oil, gas and associated hydrocarbons from the Niobrara Formation. Engineering testimony further showed that the Well will be plugged and abandoned, but to date it has produced approximately 309 barrels of oil and 4,083 MCF of gas.
11. Additional land testimony by Mr. Hoenmans was submitted on April 7, 2016. The additional land testimony showed that the Well was drilled in May, 2012, by SWEPI LP, as operator of the Williams Fork Federal Unit (COC74956X) (“Federal Unit”). The Well was completed in July, 2012, and has produced from the Niobrara Formation. In June, 2014, as Federal Unit operator, SWEPI LP submitted a Request for Paying Well Determination to the BLM. In August, 2014, the BLM officially determined that the Well was “not capable of producing unitized substances from the Niobrara Formation in paying quantities as defined by Section 9 of the unit agreement.” The Paying Well Determination further states that since the Well “was determined to be a nonpaying unit well and the lateral intersects a Federal and non-Federal lease, a drilling and spacing unit must be established for the well so that a communitization agreement can be approved by the Bureau of Land Management”. Soon after this determination, in September, 2014, GRMR acquired all Federal Unit wells, including the Well, from SWEPI LP. As the successor unit operator, GRMR, consistent with the BLM’s direction, filed its application requesting that the Application Lands be approved as a drilling and spacing unit for the Well. Since some production from the Well has been achieved, all proceeds from that production are currently being suspended pending approval of a drilling and spacing unit for the Well. A drilling and spacing unit for the well will provide the legal basis to calculate and pay the proceeds from the Well’s production.
12. 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.
13. GRMR agreed to be bound by oral order of the Commission.
14. 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 452.97-acre drilling and spacing unit for Sections 27 and 28, Township 5 North, Range 90 West,, 6th P.M., and approve the existing horizontal well drilled within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.
ORDER
IT IS HEREBY ORDERED:
1. An approximate 452.97-acre drilling and spacing unit for the below-described lands is hereby established, and the Searcy Gulch 1-27 Well (API No. 05-081-07719) that is currently drilled in the unit is hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation:
Township 5 North, Range 90 West, 6th P.M.
Section 27: Lots 1, 2, 3, 5, 6, SW¼NE¼, S½NW¼, N½SW¼
Section 28: E½ of Lot 4, E½NE¼SE¼
2. The productive interval of the wellbore will be located no closer than 600 feet from the unit boundaries, 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 29th day of April, 2016, as of April 18, 2016.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By__________________________________
Julie Murphy, Secretary