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 D-SAND AND J-SAND FORMATIONS, IN THE BADGER CREEK FIELD, ADAMS COUNTY, COLORADO

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CAUSE NO. 565

 

DOCKET NO. 190100119

 

TYPE:  UNITIZATION

 

ORDER NO. 565-1

 

REPORT OF THE COMMISSION

 

The Commission heard this matter on March 11, 2019, at the Ralph L. Carr Colorado Judicial Center, 1300 Broadway, First Floor, Denver, Colorado, 80203, upon application for an order to approve an approximate 320-acre enhanced recovery unit for Section 22, Township 2 South, Range 57 West, 6th P.M., for unitized operations for the production of oil, gas, and associated hydrocarbons from the “D” Sand and “J” Sand Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Investment Equipment LLC (Operator No. 10330) (“Investment” 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, the parties interested therein, and to promulgate the hereinafter prescribed order pursuant to the Oil and Gas Conservation Act.

 

4.         Rule 401 of the Commission Rules provides 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. No person shall commence construction of a well for use in either enhanced recovery operations or for storage of gaseous or liquid hydrocarbons without having first obtained written authorization from the Commission to do so. These provisions shall not apply to existing gas storage projects or to projects that have received approval of the Federal Energy Regulatory Commission; provided however, that a copy of such application and approval shall be submitted to the Commission and made a part of their records.

 

5.         On November 29, 2018, Applicant by its attorneys, filed a verified application (“Application”) for an order to establish an approximate 320-acre enhanced recovery unit with unitized operation pursuant to Section 34-60-118, C.R.S., for the below-described lands (“Unit Area”) for the production of oil, gas and associated hydrocarbons, operation and development of the “D” Sand and “J” Sand Formations:

 

Township 2 South, Range 57 West, 6th P.M.

Section 22: E½

 

6.         On January 4, 2019, and again on March 1, 2019, Investment, 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 Chad A. Counts, Chief Geologist for Investment, showed Investment owns 100% of the working interest in the Application Lands.  Further testimony showed that each owner of record within the Unit Area Lands and each owner of record of the reservoir involved within one-half (1/2) mile of the unit boundary were notified of the Application, and that Applicant, has procured approval of those persons who, under the Commission’s Order, will be required to pay at least eighty-percent (80%) of the costs of unit operation and the owners of at least eighty-percent (80%) of the production or proceeds of the proposed unit operation that are free of costs, such as royalties, overriding royalties and production payments. 

 

8.         Land Testimony further showed that the proposed plan for unit operations and Unit Agreement contain all of the provisions required by Section 34-60-118(4), C.R.S.

 

9.         Geologic testimony and exhibits submitted in support of the Application by Chad A. Counts, Chief Geologist for Investment, shows that the “D” Sand and “J” Sand Formations reservoirs consist primarily of fine to medium grained sandstones deposited in fluvial to deltaic environments.  Both the “D” Sand and “J” Sand Formations underlie the proposed unit.  The “D” Sand and “J” Sand Formations can be further subdivided into three intervals for the “D” Sand (informally referred to as “D1”, “D2”, and “D3”) and two intervals for the “J” Sand ((informally referred to as “J1” and “J2”).  The “D2”, “D3”, “J1”, and “J2” are oil saturated intervals, and have been productive underlying parts of the Badger Creek Field. The “D” Sand is stratigraphically trapped and pinches out to the east, whereas the “J” Sand is locally structurally and stratigraphically trapped across a much larger sand body.

 

10.       The geologic testimony further showed that the proposed unit is comprised of four active producing wells that produce from the “D” Sand and “J” Sand Formations, and one temporarily abandoned well that is the proposed injection well. The production from the four active wells has been very unstable, and an unpredictable decline from production reported since 1999 due to limitations of operations. Continued operations without a pressure maintenance program will result in an unrelenting decline in production volumes and revenue to the royalty owners and working interest holder. The geologic testimony also showed that the proposed enhanced recovery operation involves the injection of produced water into the “D” Sand and “J” Sand Formations for a water-flood operation, that it is reasonably necessary to increase the ultimate recovery of oil, gas and associated hydrocarbons from the “D” Sand Formation and “J” Sand Formation underlying the Unit Area, and that the value of the estimated additional recovery of oil, gas, and associated hydrocarbons will exceed the estimated additional cost incident to conducting such operations.  Injection of produced water will also allow for more efficient operation by continuous disposal of produced water, instead of the current practice of disposal using evaporation pits. 

 

11.       Technical aspects of the proposed enhanced recovery operations were reviewed by the Commission staff underground-injection-control-program supervisor, who had no adverse comments about the Application.

 

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.       Investment 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 320-acre enhanced recovery unit for Section 22, Township 2 South, Range 57 West, 6th P.M., for unitized operations for the production of oil, gas, and associated hydrocarbons from the “D” Sand and “J” Sand Formations.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.         An approximate 320-acre enhanced recovery unit for the below described lands is hereby established, and unitized operations are hereby approved, for the production of oil, gas, and associated hydrocarbons from the “D” Sand and “J” Sand Formations: 

 

Township 2 South, Range 57 West, 6th P.M.

Section 22: E½

 

2.         This Order shall become effective immediately.

 

3.         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.

 

4.         The portion of the unit production allocated to any tract, and the proceeds from the sale thereof, shall be the property and income of the several persons to whom, or to whose credit, the same are allocated or payable under this Order.

 

5.         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.

 

6.         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 the 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 Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.

 

2.         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.

 

3.         An application for reconsideration by the Commission of this Order is not required prior to the filing for judicial review.

 

ENTERED this 26th day of March, 2019, as of March 11, 2019.

           

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By____________________________________       

                                                                                    Mimi C. Larsen, Secretary