EVOLUTION OF SPACING AND POOLING IN COLORADO Denver Association
of Division Order Analysts July 21, 2014 Denver, Colorado Steve
Sullivan Welborn Sullivan Meck & Tooley, P.C. 1125 17 th
Street, Suite 2200 Denver, CO 80202 (303) 830-2500
[email protected] www.wsmtlaw.com
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Development of oil and gas fields prior to state
regulation
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SPACING The order establishing drilling units shall permit only
one well to be drilled and produced from the common source of
supply on a drilling unit, and shall specify the location of the
permitted well thereon. C.R.S. 34-60-116(3). 3
Slide 4
No drilling unit shall be smaller than the maximum area that
can be efficiently and economically drained by one well. CRS
34-60-116(2). SPACING 4
Slide 5
Only one well could be drilled in each spacing unit. First
person to apply receives permit to drill. Setbacks established to
protect surface rights and prevent excessive draining of adjacent
spacing units. Well would produce oil and gas from other properties
in spacing unit. 5
Slide 6
Some people could not develop their oil and gas when they
wanted to or without involving other owners in the spacing unit.
For a variety of operational reasons (geologic uncertainty, the
desire to hold acreage, need to ensure a viable surface location,
etc.) oil and gas operators would sometimes seek the largest
drilling unit they could justify. SPACING 6
Slide 7
COGCC Order No. 407-1 (1983) Codell formation One well per 80
acres. Option to drill second well Additional wells could be
drilled to other formations. Section 1: W2NW Optional Well Vertical
wells - Production from both wells allocated to mineral owners in
W2NW (80 acres) 7 SPACING Niobrara and Codell formations Weld,
Adams and other counties
Slide 8
Williams Fork formation Garfield County U.S. Department of
Energy Multi-well Experiment COGCC Order No. 139-28 (1995) 1 well
per 80 acres COGCC Order No. 139-31 (1997) 1 well per 40 acres
COGCC Order No. 139-32 (1998) 1 well per 20 acres COGCC Order No.
139- 38 (2003) 1 well per 10 acres SPACING 8
Slide 9
Williams Fork formation Garfield County SPACING
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FORCE POOLING MULTI-WELL FORCE POOLING Refusal to participate
in first well prevented participating as consenting owner in any
future wells. No information on when and where future wells would
be drilled. Statute requires that owner be given the opportunity to
recover... his just and equitable share. C.R.S. 34-60- 116(6). May
prevent owner from developing his or her own property.
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FORCE POOLING MULTI-WELL FORCE POOLING Potential for not
participating in any future wells. Free look vs. changed
circumstances. Relative risk vs. 200% statutory penalty. Royalty
owners treated differently than working interest owners. Industry
standard May prevent other owners from proposing a well in the
spacing unit. 11
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PRODUCING FORMATIONS IN THE GREATER WATTENBERG AREA Cretaceous
formations are those that formed during the Cretaceous Geologic
period which occurred between 145 million years ago and 66 million
years ago. It includes all of the formations listed in the
stratigraphic column on the left of this slide. Greater Wattenberg
Area includes all lands in Townships 2 South through 7 North, and
Ranges 61 West through 69 West.
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Rule 318A (1998) All Cretaceous fms. 5 wells per quarter
section (160 acres) Section 1: All Utilizes original drilling
windows (surface locations) for existing wells (vertical).
Allocation of production varies based upon existing spacing orders,
private agreements and location of wells SPACING Greater Wattenberg
Area Weld, Adams and other counties
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Rule 318A (2006) All Cretaceous fms. 8 completions per quarter
section in J Codell and Niobrara. Same surface locations. New
spacing rules for boundary and infill wells (directional wells).
Section 2: E2NE Section 1: W2NW Production allocated to every
quarter-quarter section (40 acres) within 460 feet of wellbore or
existing spacing unit (80, 160 or 320 acres) Greater Wattenberg
Area Weld, Adams and other counties SPACING
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Rule 318A(I) (2011) All Cretaceous fms. No limit to number of
wells. Horizontal wells Same surface locations Well bore spacing
Section 2: E2NE Section 1: W2NW Production from well allocated to
every quarter-quarter section (40 acres) within 460 feet of
perforated section of wellbore Greater Wattenberg Area Weld, Adams
and other counties SPACING
Slide 16
Rule 318A(I) (2011) all Cretaceous fms. Horizontal wells along
section lines Well bore spacing Section 2: E2 Section 1: W2
Production from well allocated to every quarter-quarter section (40
acres) within 460 feet of perforated section of wellbore. Greater
Wattenberg Area Weld, Adams and other counties SPACING
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PRODUCING FORMATIONS IN PORTIONS OF THE DJ BASIN Niobrara
formation contains up to four producing zones, often with
permeability barriers between them. Some natural fracturing exists,
creating extensive drainage in a few areas. Hydraulic fracturing
does not often create significant, long- term flow between the
producing zones, or even for distances of greater than 100 or 200
feet within zones.
Slide 18
Individual Orders All formations Horizontal wells Drilling
windows not located optimally. Section 1: All Horizontal wells:
Production from all wells allocated to entire spaced area. (40 to
1280 acres) (640 acre example) Niobrara and Codell formations Weld,
Adams and other counties SPACING
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Rule 318A(I) (2011) all Cretaceous fms. Horizontal wells along
section lines Well bore spacing Section 2: E2 Section 1: W2
Production from well allocated to every quarter-quarter section (40
acres) within 460 feet of perforated section of wellbore. Greater
Wattenberg Area Weld, Adams and other counties SPACING
Slide 20
Red dots = Well surface locations Purple, green and blue dots =
Bottom hole locations Radiating lines (spokes) = Directional well
bores Parallel lines = Horizontal well bores SEGMENT OF ONLINE GIS
MAP FROM COLORADO OIL AND GAS CONSERVATION COMMISSION WEBSITE
http://cogcc.state.co.us/ SPACING Greater Wattenberg Area Weld,
Adams and other counties
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SPACING HORIZONTAL WELLS MUST BE AT LEAST 600 FEET FROM
BOUNDARIES OF 1280-ACRE SPACING UNITS. ADDITIONAL WELL COULD CROSS
BOUNDARIES OF SPACING UNITS. ALLOCATION OF PRODUCTION FROM PRE-
EXISTING WELLS DRILLED WITHIN PRE-EXISTING 640- ACRE UNITS WAS NOT
AFFECTED. COGCC Order No. 421-4 (2011) 21 ROLLING SPACING
UNITS
Slide 22
22 SPACING EXPLORATORY SPACING UNITS USED AUTHORITY UNDER
C.R.S. 34-60-116(2) AND C.R.S. 34-60-118. 80% WORKING INTEREST AND
ROYALTY OWNERS MUST AGREE. WELLS MUST BE AT LEAST 600 FEET FROM
UNIT BOUNDARY AND 150 FEET FROM OTHER WELLS IN UNIT. NUMBER OF
WELLS NO GREATER THAN NECESSARY TO EFFECTIVELY DRAIN RESERVOIR. ONE
SURFACE LOCATION PER QUARTER-QUARTER SECTION. (40 ACRES) COGCC
Order No. 535-259 (2013)
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USED AUTHORITY UNDER C.R.S. 34-60-105 AND C.R.S. 34-60-106(2) -
AUTHORIZES COGCC TO DO WHATEVER MAY REASONABLY BE NECESSARY TO
REGULATE SPACING. 2,600-ACRE UNIT, BUT SIZE NOT LIMITED WELLS COULD
BE NOT LESS THAN 600 FEET FROM UNIT BOUNDARY. AS MANY WELLS AS
NEEDED TO EFFECTIVELY DRAIN THE RESERVOIR. 8 SURFACE LOCATIONS PER
SECTION. COGCC Order No. 540-12 (2013) UNCONVENTIONAL RESOURCE
UNITS 23 SPACING
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Effect of Federal Unleased Minerals - All formations Horizontal
wells Production from all wells allocated to entire spaced area,
including federal acreage. (640 acre example) Section 1: All
UNLEASED FEDERAL TRACTS
Slide 25
Effect of Federal Unleased Minerals - All formations Horizontal
wells Production from all wells allocated to entire spaced area,
including federal acreage. (640 acre example) Section 1: All
UNLEASED FEDERAL TRACTS
Slide 26
SPACING AND POOLING OTHER PROBLEMS Unleased interests.
Restrictive lease terms. Control of development. Pooling
notice.
Slide 27
SPACING SETBACKS At the time of initial drilling operations
20092013 Building 150500 High Density areas 3501000 Schools,
hospitals, etc. 3501000 Designated Outside Activity Area 350350+
2014 BALLOT INITIATIVES
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QUESTIONS? Steve Sullivan Welborn Sullivan Meck & Tooley PC
1125 17 th Street, Suite 2200 Denver, CO 80202 (303) 830-2500
[email protected] www.wsmtlaw.com