BEFORE THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO APPLICATION. Interests Affected
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1 BEFORE THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO IN THE MATTER OF THE PROMULGATION AND CAUSE NO. ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE WILLIAMS FORK AND DOCKET NO. ILES FORMATIONS, VEGA FIELD, GARFIELD COUNTY, COLORADO TYPE: APPLICATION Caerus Piceance LAC (Operator No ) ("Caerus" or "Applicant") submits this application to the Oil and Gas Conservation Commission of the State of Colorado ("Commission") to amend Order as it relates to the legal description for a 10-acre drilling and spacin~ unit established for portions of Section 24, Township 7 South, Range 96 West, 6 P.M., or in the alternative, to pool all interests in an approximate 10-acre drilling and spacing unit established in the same lands, for development and operation of the Williams Fork and Iles Formations. In support of its Application, Applicant states and alleges as follows: Interests Affected 1. Applicant is a corporation duly authorized to conduct business in the State of Colorado, and is a registered operator in good standing with the Commission. 2. Applicant owns certain leasehold interests in the following lands: Section 24: Lots 2, 3 and 4 (North of the center line of the Colorado River) Background acre well density is the standard for Williams Fork and Iles Formation development on the West Slope including the area of Section 24, Township 7 South, Range 96 West, 6t" P.M. In accordance with this standard, the Commission entered Order Nos /440-67, and ("Prior Spacing Orders"), which established one acre drilling and spacing unit for lands lying south of the Colorado River and one 76.9-acre drilling and spacing unit for lands lying north of the Colorado River, each within Section Since the Prior Spacing Orders authorized 10-acre bottom hole density, but the acreage of the established units are not evenly divisible by ten, Caerus-was only permitted to drill 7 wells to develop the 76.9-acre drilling and spacing unit and Ursa Operating Company, LLC ("Ursa" and with Caerus the "Parties") was only permitted to drill 56 wells to develop the acre drilling and spacing unit. Consequently, due to
2 the standard bottomhole location restrictions applied to 10-acre well density units, Section 24 could not be fully developed. 5. The Prior Spacing Orders resulted in approximately 10 acres remaining undeveloped and one fewer well to be drilled within Section To fully develop Section 24, promote efficient drainage and prevent waste, Caerus filed an application (the "Original Application") to create a third 10-acre drilling and spacing unit combining 6.9 surplus acres from lands lying north of the Colorado River contributed by Caerus with 3.1 surplus acres from lands lying south of the Colorado River contributed by Ursa for the drilling of one well. 7. On June 17, 2014, the Commission approved the Original Application and entered Order which vacated the drilling and spacing units established by the Prior Spacing Orders and established one approximate 560-acre drilling and spacing unit, one approximate 70-acre drilling and spacing unit and one approximate 10-acre drilling and spacing unit for the below described lands with 10-acre bottomhole density within the units, for the production of oil, gas and associated hydrocarbons from the Williams Fork and Iles Formations, without exception being granted by the Director: DSU#1 approximately 560-acres Section 24: Lots 1, 5 and 6; and adjacent lands thereto, lying up to the center line of the Colorado River, NE'/4 NE'/4; S'/2 NEB/4; S'/2 (excluding Lots 2, 3 and 4, North of the center line of the Colorado River, which is DSU #2, al~d the S~~2 S~~2 NW~~4 NW~~4~ which is DSU #3) DSU#2 approximately 70-acres Section 24: Lots 2, 3 and 4 (North of the center line of the Colorado River) (excluding the S'/2 S'/2 NW~~4 NW~~4~ which is DSU #3) DSU #3 -approximately 10-acres SeCtIOI~ 24. S~~2S~~2N V V ~~4NW~~4 1 "[B]y stipulation between [Caerus] and Ursa Operating LLC, [the 10-acre drilling and spacing unit] consists of 6.9- acres north and 3.1-acres south of the center line of the Colorado River..." Caerus Verified Application, April 17, 2014, at 10. 2
3 8. Pursuant to Order , Caerus permitted and drilled the Island Ranch 11 D-24 Well (API No ) within DSU #3 and is producing from the Williams Fork and Iles Formations. 9. The. 10-acre drilling and spacing unit, DSU #3, was described for convenience purposes only and did not take into account Caerus' or Ursa's actual leasehold ownership within DSU #3. As intended by the Parties, DSU #3 was to be comprised of the surplus leasehold acreage contributed by each Party 6.9 acres by Caerus and 3.1 acres by Ursa. However, as described in Order , DSU #3 does not reflect the intended acreage contribution by either Party. 10. The description of DSU #3 in Order creates an ambiguity in the ownership within the unit and may prevent the mineral owners from recovering or receiving their just and equitable share of the oil, gas and associated hydrocarbons from the Island Ranch 11 D-24 well drilled within the 10-acre drilling and spacing unit. 11. This ambiguity fails to protect either Party's- correlative rights and must be corrected to fulfill the intent of the Parties when establishing DSU #1, DSU #2, and DSU #3. In addition, a substantial amount of the royalty and revenue payments for the Island Ranch 11 D-24 well remain in suspense pending the resolution of this matter. Application to Amend Commission Order The Commission is authorized to establish and administer drilling units covering any pool in order to prevent waste, avoid drilling unnecessary wells, or protect correlative rights. C.R.S (1). Moreover, the Commission expressly reserved its rights to alter, amend or repeal Order Order , IT IS FURTHER ORDERED 2, July 8, Pursuant to C.R.S (4) and the provisions of Order , Applicant seeks to amend the legal description in such Order of the approximate 560- acre drilling and spacing unit, DSU #1, the approximate 70-acre drilling and spacing unit, DSU #2, and the approximate 10-acre drilling and spacing unit, DSU #3, as follows Amended DSU#1 approximately 560-acres Section 24: Lots 1, 5 and 6; and adjacent lands thereto, lying up to the center line of the Colorado River, NE'/4 NE'/4; S'/2 NE'/4; S'/2 (excluding Lots 2, 3 and 4, North of the center line of the Colorado River; and *~ DSU #3 described below) 3
4 Amended DSU#2 approximately 70-acres Township 7 South, Ranqe 96 West, 6th P.M. Section 24: Lots 2, 3 and 4 (North of the center line of the Colorado River) (excluding -~~~~ DSU #3 described below) Amended DSU #3 - approximately 10-acres Section 24: ~ 1 1, That part of the following described parcel of land lying in the NW'/4 as follows: Beginning at a point feet south along the shared NE line of Section 23, Township 7 South, Range 96 West and the NW line of 24, Township 7 South, Range 96 West, bears South 87 17' " East a distance of feet; Thence North 85 45' '7" East a distance of feet; Thence South 76 39' " East a distance of feet; Thence South 33 41' " West a distance of feet; Thence South 31 36' " West a distance of feet; Thence North 81 25' " West a distance of feet; Thence South 5 31' " West a distance of feet; Thence North 88 37' " West a distance of feet; Thence North 3 26' " West a distance of feet; Thence North 75 40' " West a distance of feet; Thence North 20 33' " West a distance of feet, more or less, to the point of beginning; The above described drilling and spacing units are collectively referred to as the "Proposed Amended Units." 14. A reference map depicting Amended DSU#3 is attached as Exhibit A. D
5 15. The Proposed Amended Units correctly allocate the intended leasehold acreage within Section 24. Amended DSU #3 is correctly comprised of the 6.9 surplus acres lying north of the centerline of the Colorado River contributed by Caerus and 3.1 surplus acres lying south of the centerline of the Colorado River contributed by Ursa. 16. Amending the legal description of DSU #1, DSU#2, and DSU#3 within Order will allow for the economic and efficient drainage of the Williams Fork and Iles Formations, will prevent waste, and will not adversely affect correlative rights. The Proposed Amended Units are not smaller than the maximum area that can be economically and efficiently drained by the proposed wells in the Williams Fork and Iles Formations. 17. Except for the legal description of DSU #1, DSU #2, and DSU#3, the remainder of Order will remain unaltered by this Application. 18. Applicant additionally states that royalty proceeds from the Ranch 11 D-24 well are scheduled to be paid based on the Parties' intended contribution to the 10-acre drilling and spacing unit and will not be affected by this Application. Alternative Apalication to Pool All Interests in DSU #3 19. The Commission has the express authority to pool established drilling units to prevent waste and to protect the correlative rights of owners and producers in the common source of supply to a fair and equitable share of production profits. C.R.S (6). Additionally, the pooling order "shall determine the interest of each owner in the unit." C.R.S (7)(a). 20: Pursuant to C.R.S (6), Applicant seeks an order pooling all interests in the 10-acre drilling and spacing unit described as DSU #3 for the development and operation of the Williams Fork and Iles Formations in accordance with the Parties' intent. 21. Pursuant to C.R.S (7)(a), Applicant also requests that the Commission determine that the interest of the owners within DSU #3 shall be on the same basis as the acreage contributed to the unit as follows: Caerus Leasehold2: 6.9 net acres (69% of DSU #3) Ursa Leasehold3: 3.1 net acres (31 % of DSU #3) 22. Applicant confirms that Commission Rule 530 does not apply as it is not seeking cost recovery pursuant to C.R.S (7). 23. Applicant requests that the pooling order entered as a result of this Application be made effective as of the date of this Application, or, as applicable, the 2 Consisting of lands lying north of the centerline of the Colorado River. 3 Consisting of lands lying south of the centerline of the Colorado River. 5
6 date that the costs specified in C.R.S (7)(b), are first incurred for the drilling of the Island Ranch 11 D-24 well, whichever is earlier. 24. Pursuant to Rule 507, the names and addresses of the interested parties to this Application are set forth in Exhibit B, and the undersigned certifies that copies of this Application shall be served on each interested party as required by Rule 503. WHEREFORE, Applicant requests that this matter be set for hearing at the next available opportunity, that notice be given as required by law, and that upon such hearing the Commission enter its order: A. Amending Order with respect to the legal descriptions of the approximate 560-acre drilling and spacing unit, DSU #1, the approximate 70-acre drilling and spacing unit, DSU #2, and the approximate 10-acre drilling and spacing unit, DSU #3, so that such legal descriptions reflect the. Proposed Amended Units as described in Paragraph 13 above, in order to correctly allocate the intended leasehold acreage within Section 24; or B. In the alternative, i) Pooling all interests the approximate 10-acre drilling and spacing unit described as DSU #3 for the development and operation of the Williams Fork and Iles Formations, with the pooling.order made effective as of the date of this Application, or the date that the costs specified in C.R.S (7)(b), are first incurred for the drilling of the Island Ranch 11 D-24 well, whichever is earlier; and ii) Determining that interests in the 10-acre drilling and spacing - unit comprising DSU#3 shall be calculated on the same basis as the acreage contributed to the unit regardless of its legal description as follows: Caerus Leasehold: 6.9 net acres (69% of DSU #3) Ursa Leasehold: 3.1 net acres (31 % of DSU #3) C. Making any other findings and orders as the Commission may deem proper or advisable in this matter.
7 Dated: January 7, Respectfully submitted: Gregory Nibert, Jr. Davis Graham &Stubbs LLP 1550 Seventeenth Street, Suite 500 Denver, Colorado (303) Applicant's Address: Caerus Piceance LLC Attn: Aubree Besant th Street, Suite 1600N Denver, CO
8 VERIFICATION STATE OF COLORADO ) ss. CITY AND COUNTY OF DENVER, ) Aubree Besant, of lawful age, being first duly sworn upon oath, deposes and says that she is the Rockies Lead Landman for Caerus Piceance LLC, and that she has read the foregoing Application and that the matters therein contained are true to the best of her knowledge, information and belief. Aub ee Besant, Rockies Lead Landman Ca rus Piceance LLC ~~ Subscribed and sworn to before me this ~ day of January, Witness my hand and official seal. [SEAL] My commission expires:..~~ r ~~~ A~~-~~~~ NOT18R`~' Pl1~l.IC ~Tl~TE OF COLORAC?C~ {NARY t~ 20'f ! C~ ~~ (d~! ~X~l~ ~ JANUARY ~~, 2n~7 Notary Public r
9
10 Exhibit B Interested Parties Caerus Piceance LLC th Street, Suite 1600N Denver, CO Puckett Land Company 5460 S. Quebec St., Suite 250 Greenwood Village, Colorado WPX Energy Rocky Mountain, LLC th Street, Suite 1200 Denver, CO Exxon Mobil Corporation P.O. Box 4610 Houston, TX Ursa Operating Company, PLC th St., Suite #2400 Denver, CO Michael Warren Colorado Parks and Wildlife Northwest Region Office 711 Independent Ave. Grand Junction, CO Kent Kuster Oil &Gas Consultant Coordinator CDPHE 4300 Cherry Creek Drive South Denver, CO Kirby H. Wynn Garfield County - LGD 144 East 3rd Street, Suite 206 Rifle, CO 81650
11 BEFORE THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO IN THE MATTER OF THE PROMULGATION AND CAUSE NO. ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE WILLIAMS FORK AND DOCKET NO. ILES FORMATIONS, VEGA FIELD, GARFIELD COUNTY, COLORADO TYPE: CERTIFICATE OF SERVICE STATE OF COLORADO ) )ss. CITY AND COUNTY OF DENVER ) Greg Nibert Jr., of lawful age, and being first duly sworn upon his oath, states and declares: That he is an attorney for Caerus Piceance LLC, and that on or before January 14, 2016, he caused a copy of the attached Application to be deposited in the United States Mail, postage prepaid, addressed to the parties listed on Exhibit B to the Application. Subscribed and sworn to before me January ~~, Witness my hand and official seal. My commission. expires ~ ~ ~ ~~ 2- ~ ~~ SUSANNE~~SUN NOTARY PUBLIC STATE OF COt.ORA00 NOTMtY ID IYIY a0~ss10n EXPIRES JANUAi~Y ~1~ X111 o ry Public
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