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 ENHANCED RECOVERY FROM THE MISSISSIPPI ST. LOUIS AND THE MISSISSIPPI SPERGEN FORMATIONS, QUIVER FIELD, KIOWA COUNTY, COLORADO |
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CAUSE NO. 560
DOCKET NO. 170500283
TYPE: UNITIZATION
ORDER NO. 560-1 |
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 1040-acre unit (“Quiver Unit”) for certain lands in Sections 1, 2, 11 and 12, Township 17 South, Range 48 West, 6th P.M., for the purpose of unit development and the enhanced recovery of hydrocarbons from the Mississippi St. Louis Formation and the Mississippi Spergen Formation ("Target Formations"), and to authorize operations for the Quiver Unit pursuant to the Unit Agreement and the Unit Operating Agreement.
FINDINGS
The Commission finds as follows:
1. Mull Drilling Company, Inc. (“Mull” 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. The Unit Area is subject to Rule 318.a. for the Target Formations. There are no specific Commission Orders applicable to the Target Formations underlying the Application Lands.
5. Rule 401.a provides that no person shall perform any enhanced recovery operations, cycling or recycling operations including the extraction and separation of liquid hydrocarbons from natural gas in connection therewith, or operations for the storage of gaseous or liquid hydrocarbons, nor shall any person carry on any other method of unit or cooperative development or operation of a field or a part of either, without having first obtained written authorization from the Commission to perform the aforementioned activities or operations.
6. Applicant requests that the Commission approve a state unit for enhanced recovery from the Target Formations for the Unit Area pursuant to §34-60-118 C.R.S. and the Commission's 400 Series Rules.
7. On March 2, 2017, Mull, by its attorneys, filed with the Commission pursuant to §34-60-118, C.R.S., and Commission 400-Series Rules a verified application (“Application”) for an order to establish an approximate 1040-acre unit (“Quiver Unit”) for the below-described lands (“Application Lands”) for the purpose of unit development and the enhanced recovery of hydrocarbons from the Mississippi St. Louis Formation and the Mississippi Spergen Formation ("Target Formations"), and to authorize operations for the Quiver Unit pursuant to the Unit Agreement and the Unit Operating Agreement:
Township 17 South, Range 48 West, 6th P.M.
Section 1: S½, S½N½
Section 2: SE¼
Section 11: NE¼, N½SE¼
Section 12: NW¼
8. On April 11, 2017, Mull, 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.
9. Land testimony and exhibits submitted in support of the Application by Mike Massaglia, Landman for Mull, showed that Mull has a partial undivided leasehold interest in the Application Lands, that the surface of the Application Lands is owned 100% in fee and that use of the surface of the Unit shall continue to be governed by any existing surface use agreements or surface use provisions of oil and gas leases applicable to the Unit Area, and included a representative copy of the Unit Agreement with 50.09% approval, and a representative copy of the Unit Operating Agreement with 61.46% approval.
10. Geoscience testimony and exhibits submitted in support of the Application by Ernest Morrison, Geologist for Mull, showed the Mississippi St. Louis Formation and the Spergen Formation are present throughout the Unit the geologic characteristics of the Quiver Field.
11. Engineering testimony and exhibits submitted in support of the Application by Marke A. Shreve, President and Chief Operating Officer for Mull, includes the fluid injection information required by Rule 401.b.(4) and the corresponding documentation regarding such requirements, provides produced water samples from all ten of the current producing wells in the Quiver Field, and provides a brief summary of the projected production for the Quiver Field with and without the implementation of waterflood operations, as well as the estimated cost to implement waterflood operations and the economic justification for the project with supporting production decline curves.
12. 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 1040-acre unit (“Quiver Unit”) for certain lands in Sections 1, 2, 11 and 12, Township 17 South, Range 48 West, 6th P.M., for the purpose of unit development and the enhanced recovery of hydrocarbons from the Mississippi St. Louis Formation and the Mississippi Spergen Formation ("Target Formations"), and to authorize operations for the Quiver Unit pursuant to the Unit Agreement and the Unit Operating Agreement.
ORDER
IT IS HEREBY ORDERED:
1. An approximate 1040-acre unit is hereby established (“Quiver Unit”) for the below-described lands for the purpose of unit development and the enhanced recovery of hydrocarbons from the Mississippi St. Louis Formation and the Mississippi Spergen Formation:
Township 17 South, Range 48 West, 6th P.M.
Section 1: S½, S½N½
Section 2: SE¼
Section 11: NE¼, N½SE¼
Section 12: NW¼
2. Operations are hereby authorized for the Quiver Unit pursuant to the Unit Agreement and the Unit Operating Agreement on the Application Lands.
3. This Order shall become effective upon approval in writing of the plan of Unit operations by those persons who, under the Commission’s Order, will be required to pay at least eighty-percent (80%) of the costs of the Unit operation, and also by the owners of at least eighty-percent (80%) of the production or proceeds thereof that will be credited to interests which are free of cost, such as royalties, overriding royalties, and production payments, and finding by the Commission in a supplemental order, after application, notice, and such supplemental hearing as may be required, that the requisite 80% approvals have been obtained.
4. If the persons owning the required percentage of interest in the Unit area do not approve the plan of unit operations within a period of six months from the effective date of this Order, this Order shall become ineffective and shall be revoked by the Commission unless for good cause shown the Commission extends said time.
5. All operations, including, but not limited to, the commencement, drilling, or operation of a well upon any portion of the Unit area shall be deemed for all purposes the conduct of such operations upon each separately owned tract in the Unit area by the several owners thereof. The portion of the Unit production allocated to a separately owned tract in the Unit area shall, when produced, be deemed, for all purposes, to have been actually produced from such tract by a well drilled thereon. Operations conducted pursuant to this Order shall constitute a fulfillment of all the express or implied obligations of each lease or contract covering lands in the Unit area to the extent that compliance with such obligations cannot be had because of this Order.
6. No division order or other contract relating to the sale or purchase of production from a separately owned tract shall be terminated by this Order, but shall remain in force and apply to oil and gas allocated to such tract until terminated in accordance with the provisions hereof.
7. Except to the extent that the parties affected so agree, this Order shall not be construed to result in a transfer of all or any part of title of any person to the oil and gas rights in any tract in the Unit area. All property, whether real or personal, that may be acquired in the conduct of unit operations under this Order shall be acquired for the account of the owners within the Unit area, and shall be the property of such owners in the proportion that the expenses of unit operations are charged.
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 12th day of May 2017, effective as of May 1, 2017.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By: ____________________________________
Peter Gowen, Acting Secretary