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

 

IN THE MATTER OF THE APPLICATION OF WPX ENERGY ROCKY MOUNTAIN, LLC FOR AN ORDER TO POOL ALL INTERESTS WITHIN AN APPROXIMATE 2499.80-ACRE DRILLING AND SPACING UNIT ESTABLISHED FOR SECTIONS 31 AND 32, TOWNSHIP 6 SOUTH, RANGE 95 WEST, 6TH P.M., AND SECTIONS 5 AND 6, TOWNSHIP 7 SOUTH, RANGE 95 WEST, 6TH P.M., FOR THE MANCOS, NIOBRARA, FRONTIER, MOWRY AND DAKOTA FORMATIONS, UNNAMED FIELD, GARFIELD COUNTY, COLORADO

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CAUSE NO. 547

 

DOCKET NO. 1312-UP-253

 

ORDER NO. 547-6

 

REPORT OF THE COMMISSION

 

The Commission heard this matter on December 16, 2013, at the Ralph L. Carr Colorado Judicial Center, 1300 Broadway, 1st Floor, Room 1E, Denver, Colorado, upon application for an order to pool all interests within an approximate an approximate 2499.80-acre drilling and spacing unit established for Sections 31 and 32, Township 6 South, Range 95 West, 6th P.M., and Sections 5 and 6, Township 7 South, Range 95 West, 6th P.M. to accommodate the PA 701-32-HN1 Well, for the development and operation of the Mancos Group Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.         WPX Energy Rocky Corporation, LLC (“WPX” 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.         On June 17, 2013, the Commission entered Order No. 440-68 which, among other things, established an approximate 2499.80-acre drilling and spacing unit, and approved up to eight horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Mancos, Niobrara, Frontier, Mowry, and Dakota Formations (collectively, the “Mancos Group”).  Sections 31 and 32, Township 6 South, Range 95 West, 6th P.M., and Sections 5 and 6, Township 7 South, Range 95 West, 6th P.M. are subject to this Order for the Mancos Group Formations.

 

5.         On October 17, 2013, WPX, by its attorneys, filed with the Commission pursuant to §34-60-116 C.R.S., a verified application (“Application”) for an order to pool all interests within an approximate 2499.80-acre drilling and spacing unit established for the below-described lands (“Application Lands”), for the development and operation of the Mancos Group Formations, effective as of the earlier of the date of the Application, or the date that any of the costs specified in C.R.S. §34-60-116(7)(b)(II) were first incurred for the drilling of the PA 701-32-HN1 Well (API No. 05-045-22158) (“Well”) and to subject any nonconsenting interests to the cost recovery provisions of C.R.S. §34-60-116(7):

 

                        Township 6 South, Range 95 West, 6th P.M.

                        Section 31:      Lots 1-12, SE¼ (All)  

                        Section 32:      All

 

Township 7 South, Range 95 West, 6th P.M.

Section 5:

Lots 1-11, SE¼ SW¼, SE¼ (All)

Section 6:

Lots 1-11, SE¼ NW¼, S½ NE¼, E½ SW¼, NW¼ SE¼ (All)

 

6.         On December 3, 2013, WPX, 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.         Land testimony and exhibits submitted in support of the Application by Maxwell Faith, Senior Landman for WPX, showed that all nonconsenting interest owners were notified of the Application and received an Authority for Expenditure ("AFE") and offer to participate in the Well. Further testimony concluded that the AFE sent by the Applicant to the interest owners was a fair and reasonable estimate of the costs of the proposed drilling operation and was received at least 30 days prior to the December 16, 2013 hearing date.

 

8.         Land testimony showed the Applicant complied with the requirements of Rule 530, and is entitled to the cost recovery provisions pursuant to §34-60-116(7), C.R.S., for the PA 701-32-HN1 Well, but did not provide testimony for any subsequent wells.

 

9.         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.

 

10.       WPX agreed to be bound by oral order of the Commission. 

 

11.       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 pool all interests within an approximate an approximate 2499.80-acre drilling and spacing unit established for Sections 31 and 32, Township 6 South, Range 95 West, 6th P.M., and Sections 5 and 6, Township 7 South, Range 95 West, 6th P.M. to accommodate the PA 701-32-HN1 Well, for the development and operation of the Mancos Group Formations.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.         Pursuant to the provisions of §34-60-116, C.R.S., as amended, of the Oil and Gas Conservation Act, all interests in an approximate 2499.80-acre drilling and spacing unit  established for the below-described lands, are hereby pooled, for the development and operation of the Mancos Group Formations, effective as of the earlier of the date of the Application, or the date that any of the costs specified in C.R.S. §34-60-116(7)(b)(II) are first incurred for the drilling of the PA 701-32-HN1 Well:

                   

                        Township 6 South, Range 95 West, 6th P.M.

                        Section 31:      Lots 1-12, SE¼ (All)  

                        Section 32:      All

 

Township 7 South, Range 95 West, 6th P.M.

Section 5:

Lots 1-11, SE¼ SW¼, SE¼ (All)

Section 6:

Lots 1-11, SE¼ NW¼, S½ NE¼, E½ SW¼, NW¼ SE¼ (All)

 

2.         The production obtained from the drilling and spacing unit shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within the drilling and  spacing unit; each owner of an interest in the drilling and spacing unit shall be entitled to receive its share of the production of the Well located on the drilling and spacing unit applicable to its interest in the drilling and spacing unit.

 

3.         The nonconsenting leased (working interest) owners must reimburse the consenting working interest owners for their share of the costs and risks of drilling and operating the Well (including penalties as provided by §34-60-116(7)(b), C.R.S.) out of production from the drilling and spacing unit representing the cost-bearing interests of the nonconsenting working interest owners as provided by §34-60-116(7)(a), C.R.S.

 

4.         Any unleased owners are hereby deemed to have elected not to participate and shall therefore be deemed to be nonconsenting as to the Well and be subject to the penalties as provided for by §34-60-116 (7), C.R.S.  Any party seeking the cost recovery provisions of §34-60-116 (7), C.R.S., shall first comply with subsection (d) for any subsequent well(s).

 

5.         Each nonconsenting unleased owner within the drilling and spacing unit shall be treated as the owner of the landowner's royalty to the extent of 12.5% of its record title interest, whatever that interest may be, until such time as the consenting owners recover, only out of each nonconsenting owner's proportionate 87.5% share of production, the costs specified in §34-60-116(7)(b), C.R.S. as amended.  After recovery of such costs, each unleased nonconsenting mineral owner shall then own its proportionate 8/8ths share of the Well, surface facilities and production, and then be liable for its proportionate share of further costs incurred in connection with the Well as if it had originally agreed to the drilling.

 

6.         The operator of the well drilled on the above-described drilling and spacing unit shall furnish the nonconsenting owners with a monthly statement of all costs incurred, together with the quantity of oil and gas produced, and the amount of proceeds realized from the sale of production during the preceding month.

 

7.         Nothing in this order is intended to conflict with §34-60-116, C.R.S., as amended.  Any conflict that may arise shall be resolved in favor of the statute.

 

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 _____ day of January, 2014, as of December 16, 2013.

 

           

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary