BEFORE THE OIL AND
GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
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IN THE MATTER OF THE SECOND AMENDED APPLICATION OF SG INTERESTS I, LTD. FOR AN ORDER TO ESTABLISH AN APPROXIMATE 2,240-ACRE DRILLING AND SPACING UNIT, AND APPROVE UP TO 12 NEW HORIZONTAL AND/OR VERTICAL WELLS WITHIN THE UNIT, LOCATED IN SECTIONS 9, 15, 16 AND 22, TOWNSHIP 11 SOUTH, RANGE 90 WEST, 6TH P.M., FOR THE MANCOS FORMATION, UNNAMED FIELD, GUNNISON COUNTY, COLORADO |
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CAUSE NO. 547
DOCKET NO. 1302-SP-27
ORDER NO. 547-1 AMENDED |
REPORT OF THE COMMISSION
The Commission heard this matter on May 6, 2013, at the Weld County Southwest Services Complex, 4209 Weld County Road 24 ½, Longmont, Colorado, upon application for an order to establish an approximate 2,240-acre drilling and spacing unit for Sections 9, 15, 16 and 22, Township 11 South, Range 90 West, 6th P.M., and approve up to twelve new horizontal and/or vertical wells within the unit, for the production of oil, gas and associated hydrocarbons from the Mancos Formation.
FINDINGS
The Commission finds as follows:
1. SG Interests I, Ltd. ("SG" or “Applicant”), 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. Sections 9, 15, 16 and 22, Township 11 South, Range 90 West, 6th P.M. are subject to Rule 318.a. for the Mancos Formation.
5. On December 12, 2012 (second amended March 14, 2013), SG, by its attorneys, filed with the Commission pursuant to §34-60-116 C.R.S., a verified second amended application (“Second Amended Application”) for an order to establish an approximate 2,240-acre drilling and spacing unit (“DSU”) for the below-described lands (“Application Lands”), and approve up to 12 new horizontal and/or vertical wells within the unit, in addition to the Federal 11-90-15 #1 Well, for the production of oil, gas and associated hydrocarbons from the Mancos Formation, with the treated interval of the wellbore to be located no closer than 600 feet from the unit boundaries, and no closer than 600 feet from the treated interval of the lateral legs of any other wellbore located in the unit, except as to the toes of the lateral legs of the horizontal wellbores, which may abut each other, without exception being granted by the Director:
Township 11 South, Range 90 West, 6th P.M.
Section 9: All
Section 15: All
Section 16: All
Section 22: N½
Applicant stated production from the existing Federal 11-90-15 #1 Well shall be allocated to the proposed unit.
6. On January 9, 2013, SG filed an Amended Application with the Commission.
7. On January 25, 2013, SG requested and Commission staff granted, a continuance to the March 25, 2013 hearing.
8. On February 5, 2013, the U.S. Bureau of Land Management submitted its protest to SG’s original amended application, raising issues relating to the overlap of the proposed DSU with an existing federal unit, and the allocation of production from an existing well on the proposed drilling and spacing unit.
(a) In response to BLM’s protest, SG submitted its Second Amended Application on March 14, 2013, which, inter alia, reduced the size of the proposed DSU by eliminating lands that overlapped with an existing federal unit (Coal Basin Federal Unit) and specified that production from the Federal 11-90-15 #1 Well shall be allocated to the proposed DSU.
(b) SG further committed to communitize the lands within the DSU, which will occur through the submission by SG, and subsequent BLM approval, of a communitization agreement (CA). The effective date of the CA will be the approval date of the DSU by the Commission, due to the existing Federal 11-90-15 #1 Well drilled to the Mancos Formation on the Application Lands and committed to the DSU.
9. On February 28, 2013, SG requested and Commission staff granted, a continuance to the May 6, 2013 hearing.
10. On March 11, 2013 (amended on March 25, 2013), Gunnison Energy Corporation (“GEC”), by its attorneys, filed with the Commission a protest to the Second Amended Application alleging that SG’s proposed drilling and spacing unit would result in waste, inconsistent with the Oil and Gas Conservation Act.
11. On March 11, 2013, Thomas M. Kim, as Plan Administrator for the assets of Riviera Drilling and Exploration, Inc. (“Riviera”), filed a protest to the Application stating that Riviera is a debtor in bankruptcy with a lease interest in the W½ of Section 16, Township 11 South, Range 90 West, 6th P.M. Riviera stated that GEC was assuming its lease interests pursuant to the Chapter 11 Plan, and that Riviera adopted the positions of GEC with regard to its protest of the Application.
12. On April 18, 2013, a prehearing conference (“PHC”) was held. A discussion followed whereby the parties were unable to resolve the Protests. The Hearing Officer issued a Prehearing Conference Report and Order establishing a briefing schedule for an adjudicatory hearing before the Commission.
13. On April 23, 2013, The Board of County Commissioners of Gunnison County (“Gunnison County”) filed a protest to the Second Amended Application, alleging that it would result in excessive fracturing of the surface estate.
14. On April 29, 2013, the BLM conditionally withdrew its protest following the withdrawal of certain federal lands from the Application Lands, and allocation of production from the existing Federal 11-90-15 #1 Well into the proposed drilling and spacing unit.
15. On May 6, 2013, the Commission convened an adjudicatory hearing wherein SG presented evidence in support of its Application and GEC, Riviera, and Gunnison County presented evidence in support of their respective Protests. The Commission deliberated and made the following findings and entered the following orders.
16. Land testimony and exhibits submitted in support of the Second Amended Application by Robbie Guinn, Vice President of Land for SG, showed the surface and minerals within the Application Lands are owned by the federal government, except for a portion of the surface and minerals located in the N½ NE¼ of Section 15, Township 11 South, Range 90 West, 6th P.M., which is held in fee, and that SG owns a substantial leasehold ownership interest in the Application Lands.
17. Geologic testimony and exhibits submitted in support of the Second Amended Application by Albert Haertlein, Geologist for SG, showed the Mancos Formation is present throughout the Application Lands, is generally of uniform thickness throughout the Application Lands, and that the formation may be adequately drained through a combination of horizontal and vertical wells. Mr. Haertlein’s testimony also showed that the unit configuration will allow optimal orientation of horizontal wellbores to maximize the effective drainage of the formation underlying the DSU.
18. 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, will not violate correlative rights, and will not result in excessive fracturing of the surface estate.
20. SG agreed to be bound by oral order of the Commission.
21. The Commission adjudicated the Amended Application on May 6, 2013 and entered Order No. 547-1 granting the relief requested in the Amended Application. Publication of this Notice of Hearing, pursuant to §34-60-108(4), C.R.S., in a newspaper of general jurisdiction in the City and County of Denver did not occur. Under this Notice, any interested party desiring to protest the granting of the Amended Application or intervene on the Amended Application for this matter may file a protest or intervention. Any party with actual or constructive notice of the original proceeding is limited to the existing record, in the absence of new evidence.
22. No new protests were received.
23. Based on the facts stated in the verified Second Amended Application, and based on the evidence presented to the Commission at an adjudicatory hearing by SG, GEC and Gunnison County, the Commission voted unanimously to approve an approximate 2,240-acre drilling and spacing unit for Sections 9, 15, 16 and 22, Township 11 South, Range 90 West, 6th P.M., and approve up to twelve new horizontal and/or vertical wells within the unit, for the production of oil, gas and associated hydrocarbons from the Mancos Formation.
ORDER
NOW, THEREFORE IT IS ORDERED, that an approximate 2,240-acre drilling and spacing unit for the below-described lands, is hereby established, and up to twelve new horizontal and/or vertical wells within the unit, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Mancos Formation, with the treated interval of the wellbore to be located no closer than 600 feet from the unit boundaries, and no closer than 600 feet from the treated interval of the lateral legs of any other wellbore located in the unit, except as to the toes of the lateral legs of the horizontal wellbores, which may abut each other, without exception being granted by the Director:
Township 11 South, Range 90 West, 6th P.M.
Section 9: All
Section 15: All
Section 16: All
Section 22: N½
IT IS FURTHER ORDERED, that production from the existing Federal 11-90-15 #1 Well shall be allocated to the proposed unit.
IT IS FURTHER ORDERED, that communitization of the lands within the DSU will occur through the submission by SG, and subsequent BLM approval, of a communitization agreement (CA). The effective date of the CA will be the approval date of the DSU by the Commission due to the existing producing Mancos Formation well (Federal 11-90-15 #1) within and committed to the DSU.
IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective immediately.
IT IS FURTHER ORDERED, that the Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.
IT IS FURTHER ORDERED, that under the State Administrative Procedures 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.
IT IS FURTHER ORDERED, that an application for reconsideration by the Commission of this Order is not required prior to the filing for judicial review.
ENTERED this 31st day of May, 2013, as of May 6, 2013.
AMENDED this 28th day of March, 2014, as of March 17, 2014.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary