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 CRETACEOUS DAKOTA SANDSTONES FORMATION, WEST PADRONI FIELD, LOGAN COUNTY, COLORADO

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CAUSE NO. 7

 

DOCKET NO. 170900624

 

TYPE: UNITIZATION

 

ORDER NO. 7-5

 

 

report of the commission

The Commission heard this matter on November 28, 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 1,376-acre enhanced recovery unit for portions of Section 31, Township 10 North, Range 52 West, 6th P.M., Sections 6 and 7, Township 9 North, Range 52 West, 6th P.M., and Section 1, Township 9 North, Range 53 West, 6th P.M., for unitized operations for the production of oil, gas, and associated hydrocarbons from the Cretaceous Dakota Sandstones Formation.

FINDINGS

The Commission finds as follows:

1.         Citation Oil & Gas Corp. (Operator No. 17180) (“Citation” 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 August 15, 2005, the Commission entered Order No. 7-3 which, among other things, established 20-acre drilling and spacing units, for the production of oil, gas and associated hydrocarbons from the Dakota O-Sand Formation, with the permitted well locations to be in accordance with Order No. 7-3.

5.         On November 27, 2006, the Commission entered Order No. 7-4, which, among other things, approved an exception location to Order No. 7-3 for the location of the DuBois #7H well as specified in Order No. 7-4 for the production of oil, gas and associated hydrocarbons from the Dakota O-Sand Formation.

6.         Rule 401.a of the Rules and Regulations of the Oil and Gas Conservation Commission 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.

7.         Applicant requests that the Commission approve a state unit for enhanced recovery from the Unitized Formation for the Unit Area pursuant to §34-60-118 C.R.S. and the Commission’s 400 Series Rules.

8.         On July 13, 2017, Application, by its attorneys, filed a verified application (“Application”) for an order to establish an approximate 1,376-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 Cretaceous Dakota Sandstones Formation:

Township 10 North, Range 52 West, 6th P.M.

Section 31:      Lots 1, 2, 3, 4, E½W½ (a/d/a W½), SE¼

 

Township 9 North, Range 52 West, 6th P.M.

Section 6:        Lots 1, 2, 3, 4, 5, 6, 7, SE¼NW¼, E½SW¼, S½NE¼,

                        SE¼ (a/d/a All)

Section 7:        E½NE¼

 

Township 9 North, Range 53 West, 6th P.M.

Section 1:        Lot 1, SE¼NE¼, E½SE¼ (a/d/a E½E½)

 

9.         On October 4, 2017, Citation, 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.

10.       Land testimony and exhibits submitted in support of the Application by Fletcher Ortiz, Landman for Citation, showed Citation is the General Partner of Citation 2004 Investment Limited Partnership, which 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 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.

 11.      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.  The sole working interest owner has approved the Unit Agreement and the Unit Operating Agreement.

 

11.       Geologic testimony and exhibits submitted in support of the Application by Susan W. James, Geologic Manager for Citation, shows the Cretaceous Dakota Sandstone Formation is found at a depth of approximately 4,605 feet to 5,290 feet subsurface under the Unit Area, that the D-Sand, J-Sand, and O-Sand Formations of the Dakota Group are productive.  The D-Sand is underlain by impermeable marine shale formations and the J-Sand and O-Sand are overlain and underlain by impermeable marine shale formations.  Included in the geologic testimony were a cross-section and an isopach map showing the formation tops of the O-Sand structure underlying the Unit Area. The testimony further showed that the Dakota Group is a stratigraphic trap that will not allow the flow of injection fluids outside of the unit.

 

12.       Engineering testimony and exhibits submitted in support of the Application by Ben F. Wilson, Senior Staff Engineer for Citation, showed that the proposed enhanced recovery operation involves the injection of water into the pool for a water-flood operation, that it is reasonably necessary to increase the ultimate recovery of oil from the Cretaceous Dakota Sandstone Formation underlying the Unit Area, and that the value of the estimated additional recovery of oil exceed the estimated additional cost incident to conducting such operations.

10.       Technical aspects of the proposed enhanced-recovery operations were reviewed by the Commission staff engineers, who had no adverse comments about the Application.

 

11.       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.

 

12.       Citation 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 1,376-acre enhanced recovery unit for portions of Section 31, Township 10 North, Range 52 West, 6th P.M., Sections 6 and 7, Township 9 North, Range 52 West, 6th P.M., and Section 1, Township 9 North, Range 53 West, 6th P.M., and approve unitized operations for the production of oil and associated hydrocarbons from the Cretaceous Dakota Sandstone Formation.

ORDER

IT IS HEREBY ORDERED:

1.         An approximate 1,376-acre enhanced recovery unit for the below described lands is hereby established, and unitized operations are hereby approved, for the production of oil and associated hydrocarbons from the Cretaceous Dakota Sandstones Formation:

Township 10 North, Range 52 West, 6th P.M.

Section 31:      Lots 1, 2, 3, 4, E½W½ (a/d/a W½), SE¼

 

Township 9 North, Range 52 West, 6th P.M.

Section 6:        Lots 1, 2, 3, 4, 5, 6, 7, SE¼NW¼, E½SW¼, S½NE¼,

                        SE¼ (a/d/a All)

Section 7:        E½NE¼

 

Township 9 North, Range 53 West, 6th P.M.

Section 1:        Lot 1, SE¼NE¼, E½SE¼ (a/d/a E½E½)

 

2.         Operations are hereby authorized for the West Padroni (Dakota) Unit pursuant to the Unit Agreement and the Unit Operating Agreement on the Application Lands.

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.

5.         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 28th day of December, 2017, as of November 28, 2017.

           

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By_______________________________________ 

                   Julie Spence Prine, Secretary