559-1

BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE MANCOS FORMATION, UNNAMED FIELD, RIO BLANCO COUNTY, COLORADO

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CAUSE NO. 559

DOCKET NO. 170500226

TYPE: SPACING

ORDER NO. 559-1

REPORT OF THE COMMISSION

The Commission heard this matter on May 1, 2017, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado upon application for an order to establish an approximate 2,106.47-acre drilling and spacing unit for Sections 13, 14, 15, 22, 23, 24, and 27, Township 1 South, Range 104 West, 6^th P.M., and approve up to 37 wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Mancos Formation.

FINDINGS

The Commission finds as follows:

1. Robert L. Bayless, Producer LLC (Operator No. 16520) (“Bayless” 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. Commission Rule 318.a. requires 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 13, 14, 15, 22, 23, 24, and 27, Township 1 South, Range 104 West, 6^th P.M., are subject to this Order for the production of oil, gas, and associated hydrocarbons from the Mancos Formation.

5. On March 2, 2017, Bayless, by its attorneys, filed with the Commission a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to: 1) establish an approximate 2,106.47-acre drilling and spacing unit for the below-described lands (“Application Lands”) and to approve up to 37 wells within the unit, for the production of oil, gas and associated hydrocarbons from the Mancos Formation, with the productive interval of the wellbore to be located no closer than 330 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; an 2) bring certain existing Mancos Wells into the unit:

Township 1 South, Range 104 West, 6^th P.M.
Section 13:      NE¼, S½, S½S½S½NW¼
Section 14:      S½, S½S½S½N½
Section 15:      Lots 3 and 4
Section 22:      All
Section 23:      All
Section 24:      NW¼
Section 27:      All

6. Applicant states that it currently utilizes eight well pads within the Application Lands and is requesting one new multi-well pad.

7. On April 10, 2017, supplemented April 24, 2017, Bayless, 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.

8. Land testimony and exhibits submitted in support of the Application by Cranford D. Newell, Jr., Land Manager for Bayless, showed that Bayless holds oil and gas leasehold interests and has a right to drill in the Application Lands.

9. Applicant states that pursuant to Rule 318.a., Bayless has permitted and currently operates the existing wells set out below within the Application Lands for the production of oil, gas and associated hydrocarbons from the Mancos Formation which will be brought into the unit and included in the total of 37 wells approved for the unit:

a. Weaver Ridge 24‐6 Well (API No. 05‐103‐10522)

b. Weaver Ridge 27‐9 Well (API No. 05‐103‐10579)

c. Weaver Ridge 27‐1 Well (API No. 05‐103‐10671)

d. Weaver Ridge 23‐15 Well (API No. 05‐103‐10581)

e. Weaver Ridge 23‐14 Well (API No. 05‐103‐10668)

f. Weaver Ridge 23‐10 Well (API No. 05‐103‐10679)

g. Weaver Ridge 23‐16 Well (API No. 05‐103‐10520)

h. Weaver Ridge 13‐16 Well (API No. 05‐103‐11782)

i. Weaver Ridge 13‐9 Well (API No. 05‐103‐10580)

j. Weaver Ridge 13‐9H Well (API No. 05‐103‐11781)

k. Weaver Ridge 23‐7H Well (API No. 05‐103‐11933)

l. Weaver Ridge 14‐15H Well (API No. 05‐103‐11932)

10. The drilling and spacing unit contains federal minerals. As such, Bayless agreed to enter into a Communitization Agreement with the Bureau of Land Management on or before July 1, 2017, which is the date the existing wells within the proposed drilling and spacing unit will be incorporated into the unit.

11. Geologic testimony and exhibits submitted in support of the Application by George Coryell, Senior Geologist for Bayless, showed that the Mancos Formation is made up of interlaminated shale, siltstone, and sandstone, and is a common source of supply that underlies the Application Lands. Further testimony showed that the Mancos A sandstone and the Mancos B sandstone have a combined thickness of approximately 470 feet at the southwest corner of the Application Lands and thin to approximately 340 feet in the northeast corner of the Application Lands.

12. Engineering testimony and exhibits submitted in support of the Application by John Thomas, Production and Asset Manager for Bayless, showed that the drainage area for analog horizontal Mancos Formation wells is estimated at 35 acres and 40 acres for vertical wells, and an approximate 2,106.47-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by a well producing oil, gas and associated hydrocarbons from the Mancos Formation. Engineering testimony further showed that existing wells within 330 feet of each other show no identifiable drainage of or communication between the wells.

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. Bayless agreed to be bound by oral order of the Commission.

15. 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 order to establish an approximate 2,106.47-acre drilling and spacing unit for Sections 13, 14, 15, 22, 23, 24, and 27, Township 1 South, Range 104 West, 6^th P.M., and approve up to 37 wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Mancos Formation.

ORDER

IT IS HEREBY ORDERED:

1. An approximate 2,106.47-acre drilling and spacing unit for the below-described lands, is hereby established, and a total of up to 37 wells within the unit are hereby approved, for the production of oil, gas and associated hydrocarbons from the Mancos Formation:

2. The productive interval of the wellbore will be located no closer than 330 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore producing from the same source of supply within the unit, unless the Director grants an exception.

3. The following existing wells within the approximate 2,106.47-acre drilling and spacing unit hereby established for the production of oil, gas, and associated hydrocarbons from the Mancos Formation shall be brought into the unit and included in the total of 37 wells approved for the unit:

a. Weaver Ridge 24‐6 Well (API No. 05‐103‐10522)

b. Weaver Ridge 27‐9 Well (API No. 05‐103‐10579)

c. Weaver Ridge 27‐1 Well (API No. 05‐103‐10671)

d. Weaver Ridge 23‐15 Well (API No. 05‐103‐10581)

e. Weaver Ridge 23‐14 Well (API No. 05‐103‐10668)

f. Weaver Ridge 23‐10 Well (API No. 05‐103‐10679)

g. Weaver Ridge 23‐16 Well (API No. 05‐103‐10520)

h. Weaver Ridge 13‐16 Well (API No. 05‐103‐11782)

i. Weaver Ridge 13‐9 Well (API No. 05‐103‐10580)

j. Weaver Ridge 13‐9H Well (API No. 05‐103‐11781)

k. Weaver Ridge 23‐7H Well (API No. 05‐103‐11933)

l. Weaver Ridge 14‐15H Well (API No. 05‐103‐11932)

4. Bayless shall enter into a Communitization Agreement with the Bureau of Land Management on or before July 1, 2017, which is the date the existing wells within the proposed drilling and spacing unit will be incorporated into the unit.

5. All new wells permitted under this Order shall be drilled from an existing well pad or no more than one new multi-well pad within the Application Lands, 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 8th day of May, 2017, as of May 1, 2017.

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By____________________________________

Peter Gowen, Acting Secretary