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Glodes Corners Road Field (Columbia NR) - Decision and Order, May 30, 2000

Decision and Order, May 30, 2000

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the Matter

of

the proposed order of field-wide well spacing rules and the integration of interests
pursuant to Environmental Conservation Law (ECL) §§23-0501 and 23-0901 for

the GLODES CORNERS ROAD FIELD
Steuben County, New York

File No.: DMN 99-1

Decision and Order

WHEREAS:

  1. This Decision and Order relates to the proposal of the New York State Department of Environmental Conservation Staff ("Staff") to establish well spacing in the Glodes Corners Road Field, a find of natural gas, in portions of Steuben County. It also relates to the Staff's proposal to establish procedures for future well spacing and compulsory integration, when needed, in the Glodes Corners Road Field. The well spacing and compulsory integration proposals were made pursuant to ECL Article 23, Titles 5 and 9, respectfully.
  2. Pursuant to a Notice of Public Hearing published on May 26, 1999, public hearing sessions were held before Administrative Law Judge ("ALJ") Frank Montecalvo on June 21, 1999 and June 22, 1999 at the Steuben County Civil Defense Building, State Route 54 (Bath-Hammondsport Road), Bath, New York.
  3. As stated in the attached Summary Hearing Report prepared by ALJ Daniel P. O'Connell, Columbia Natural Resources ("CNR" or "Columbia") and the Staff reached agreements on matters raised in the Staff's proposal and embodied those agreements in an executed Stipulation dated January 25, 2000 ("Stipulation").
  4. The ALJ's Summary Hearing Report (attached), which includes the Stipulation incorporated by reference, finds that the hearing record reveals no grounds why the proposed activity should be modified or denied and that no issues were raised that require further proceedings. Accordingly, upon review of the Stipulation and the ALJ's Summary Hearing Report, I adopt the ALJ's recommendation to issue the well field spacing Order.

NOW, THEREFORE, having found that the Stipulation will result in the efficient and economical development of the gas field as a whole; establishes fourteen (14) spacing units for the existing wells in the Glodes Corners Road Field; establishes procedures for future well spacing and compulsory integration, when needed, in the Glodes Corners Road Field; as is necessary to carry out the policy provisions of ECL Section 23-0301, it is ORDERED that:

  1. The Stipulation executed by Columbia and the Department, dated January 25, 2000, and its terms and conditions, including Exhibit A thereto, are hereby made a part of this Decision and Order.
  2. The Stipulation resolves all outstanding issues regarding the following matters: (1) well spacing in the Glodes Corners Road Field; (2) allocation of royalty interest due to unit owners affected by the production from existing and future proposed wells; and (3) permit application procedures for any future proposed wells. The Stipulation applies only to natural gas and/or oil production realized from that area in Steuben County, New York, as identified on the map attached to the Stipulation as Exhibit A, which shows those surface land overlying the natural gas bearing pool within the Ordovician Trenton/Black River carbonates, as extended or modified by additional wells drilled and completed pursuant to this Decision and Order.
  3. As operator of each of the Spacing Units for the 13 existing wells (one of which as been duly plugged and abandoned) in the Glodes Corners Road Field, Columbia shall file a copy of this Decision and Order, including the Stipulation and Exhibit A, with the Steuben County Clerk against all parcels in the Glodes Corners Road Field on the effective date of this Order. Columbia shall submit proof of such filing to the Department's Division of Mineral Resources within 30 days of the effective date of this Order.
  4. The escrow of royalties ordered under my February 25, 2000 Interim Decision are hereby released. As detailed in that Decision, the funds are to be distributed to the participating landowners based on the filed spacing units and lease agreements.

For the New York State Department
of Environmental Conservation

_____________/s/_____________
By: John P. Cahill, Commissioner

Dated: Date: Albany, New York
May 30, 2000

To: Arlene J. Lotters, Esq.
NYSDEC Division of Legal Affairs
50 Wolf Road
Albany, New York 12233-1500

Bradley J. Field
NYSDEC Division of Mineral Resources
50 Wolf Road
Albany, New York 12233-6500

Christopher B. Wallace, Esq.
1602 Sunset Avenue
Utica, New York 13502

Lee Robinson
Columbia Natural Resources, Inc.
900 Pennsylvania Avenue
PO Box 6070
Charleston, West Virginia 2562

Christopher A. Spence, Esq.
1425 Rand Building
Buffalo, New York 14203

STATE OF NEW YORK
DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the matter of the proposed order of field-wide well spacing rules and the integration of interests pursuant to Environmental Conservation Law (ECL) §§23-0501 and 23-0901 for the GLODES CORNERS ROAD FIELD Steuben County, New York File No.: DMN 99-1

Summary Hearing Report

_____________/s/_____________
by Daniel P. O'Connell
Administrative Law Judge

The Department's Proposed Action

The New York State Department of Environmental Conservation (the Department) proposes to establish field-wide rules for the spacing of oil and natural gas wells and to order the integration of interests within the resulting spacing units in the Glodes Corners Road Field,(1) which is located in the Towns of Pulteney and Prattsburgh, Steuben County, New York. Columbia Natural Resources, Inc., 900 Pennsylvania Avenue, PO Box 6070, Charleston, WV 25362-0070 (Columbia) has developed producing gas wells in the field.

The Department proposes this action because the geologic conditions in the field appear to make the regulatory statewide minimum well-spacing requirements inadequate for protecting correlative rights and promoting the efficient and economic development of the resource, as required by ECL Article 23, Title 5. The specifics of the proposed action are set forth in a stipulation dated January 25, 2000 between Columbia and the Department [Exhibit 21] that outlines the rules for further development of the Glodes Corners Road Field, and which specifies the boundaries of the proposed well spacing units [See Exhibit 21A].

Proceedings

To initiate the proposed action, a Notice of Public Hearing dated May 19, 1999 (the Notice)(2) was published in the Department's Environmental Notice Bulletin, and in The Corning Leader on May 26, 1999. Copies of the Notice were also mailed to the supervisors and clerks of the Towns of Pulteney and Prattsburgh, the clerk of Steuben County, as well as to other persons deemed interested in this proceeding. In addition, Columbia mailed copies of the Notice to 183 individuals on June 3, 1999. Pursuant to the Notice, Administrative Law Judge (ALJ) Frank Montecalvo, from the Department's Office of Hearings and Mediation Services, convened public hearing sessions at 2:00 PM and 7:00 PM on June 22, 1999 at the Steuben County Civil Defense Building, State Route 54 (Bath-Hammondsport Road), Bath, NY.

At the hearing sessions and throughout these proceedings, Arlene J. Lotters, Esq. has represented the Department Staff. Ms. Lotters is the program attorney for the Department's Division of Mineral Resources. At the hearing sessions and throughout these proceedings, Columbia has been represented by Christopher B. Wallace, Esq., of Utica, NY.

Ms. Lotters and Thomas E. Noll, Mineral Resources Specialist II, from the Department Staff presented sworn testimony at the June 22, 1999 hearing. Sworn testimony was also taken from the following: Mitchel Kozak, David Lachance, James Fox, David Covert, Vincent Bedient, Tracy Gingrich, Christopher Spence, Jeffrey Squires, David Whedbee from the Belden & Blake Corporation, Robert Curry, and Kevin Cronk. Some of these witnesses also submitted exhibits. Subsequent to the hearing, affidavits were received from Richard W. Beardsley from Columbia, Kathleen and Duane Bergstresser, and James R. Pizura. With a cover letter dated

July 2, 1999, Christopher A. Spence, Esq., filed an affidavit by his parents, Erwin J., Jr. and Alice M. Spence [Exhibit 16(G)].

After reviewing the hearing record, the ALJ issued Rulings after Public Hearing and Order of Further Proceedings dated October 28, 1999 (the rulings and order), which identified two issues. The first issue required the Staff to demonstrate further that the proposed minimum 5,280 ft. spacing and 240 acre unit size requirements would comply with applicable statutory requirements. The second issue required the Staff to show further that the size, shape and location of the proposed units would comply with applicable statutory requirements. With respect to the second issue, the ALJ directed the Staff to address the concerns raised in the testimony offered by Mr. Covert and his attorney, Mr. Squires; Mr. Cronk, Mr. Fox, Mr. Bedient, Mr. Pizura and Mr. Spence.

Pending a final Order from the Commissioner about the proposed action, the Staff moved on June 12, 1999 for an order requiring Columbia to place the proceeds of production from existing field wells attributable to unleased parcels in the proposed spacing units into escrow, and to pay royalties to existing lessors based on the oil and gas lease agreements in effect. Alternatively, the Staff moved for an order that would "shut-in" production. The ALJ addressed the Staff's motion in a ruling separate from the October 28, 1999 rulings and order.(3)

Columbia, the Staff, the US Department of the Interior, Bureau of Land Management, and Robert Curry appealed the ALJ's rulings.(4) In an Interim Decision dated February 25, 2000, the Commissioner determined that the Department Staff has authority to protect correlative rights, and therefore may require Columbia to escrow royalties until the proposed action is finalized. After rejecting arguments that escrow payments should be made retroactive to the date that gas production began, the Commissioner directed Columbia to escrow royalties within 10 days from the date of the Interim Decision. The Commissioner remanded the matter to the ALJ to determine whether and to what degree additional adjudication is necessary. In ordering the remand, the Commissioner directed the ALJ to make sure that confidential information is protected.

After several modifications to the filing schedule, the Staff and Columbia submitted pre-filed testimony. With a cover letter dated January 26, 2000, the Staff filed an affidavit by Bradley J. Field, Director, DEC Bureau of Oil and Gas Regulation [Exhibit 20]. With a cover letter dated January 25, 2000, Columbia filed: (1) a stipulation dated January 25, 2000 [Exhibit 21], (2) a map identified in the stipulation as Exhibit A, and which was marked for identification in the hearing record as Exhibit 21A, and (3) a Report of Columbia Natural Resources, Inc. on Glodes Corners Road Field with attachments [Exhibits 22, 22A, 22B, 22C, 22D, and 22E]. Subsequently, with a cover letter dated January 29, 2000, Columbia provided full size copies of the maps previously marked as Exhibits 22A and 22B.

With a cover letter dated February 25, 2000, Mr. Spence responded and filed two affidavits. The first affidavit was by Mr. Spence who filed on behalf of his parents and clients, Erwin J., Jr. and Alice M. Spence. The second, was a joint affidavit by Christopher A. Scholz, Ph.D. and Joseph E. Robinson, Ph.D.

In a letter dated March 17, 2000, the Department Staff replied to Mr. Spence. The Staff's reply included another affidavit by Mr. Field also dated March 17, 2000. Columbia's reply is dated March 17, 2000 and includes statements by Mr. Beardsley and Mian M. Ahmad.

The matter was reassigned to ALJ Daniel P. O'Connell on March 7, 2000.

Findings of Fact

  1. Erwin J. Jr. and Alice M. Spence own property located near the northwest corner of the proposed Bergstresser unit. The Spence property is shown on Exhibit 5(G), immediately south of Mr. Alfano's 5.02 acre parcel.(5) [Transcript, June 22, 1999 (2:00 p.m. to 3:25 p.m.) p. 55].
  2. The Glodes Corners Road Field is a structurally controlled gas field in the Ordovician Black River Dolomite. The northern and southern extent of the field are well defined by high angle (i.e., near vertical) normal faults. The eastern and western extent of the field in not well defined. The area between the north and south faults is secondary dolomite in the Black River having the configuration of a structural graben. For purposes here, a graben as an isolated structural feature that is a long narrow trough in the earth's crust which is bounded by faults. Natural gas will migrate within the graben, but not beyond its boundaries. [Exhibits 22, p. 3, and 22B; Columbia's March 17, 2000 Response (Mr. Beardsley)].
  3. The graben is offset on the east side of the field by a transcurrent or tear fault that extends from the northwest to the southeast across the well field. The fault is located on the east side of the field between what has been proposed as the Pizura well spacing unit on the west, and the proposed Bergstresser and the Ridigan well spacing units on the east. The tear fault intersects the Egresi well. The reservoir is physically separated by this tear fault. [Exhibits 22, p. 3, and 22A].
  4. The results from pressure tests corroborate the seismic data which show that the Bergstresser well is isolated from the main body of the reservoir through a transcurrent (tear) fault system. Furthermore, the results from a pressure transient test in the Bergstresser well in November 1999 further demonstrate that the well is in a limited reservoir. [Columbia's March 17, 2000 Response (Mr. Ahmad)]
  5. Exhibit 5(G) has been revised to remove the two westernmost units because the reservoir is not productive in this portion of the field. Columbia has plugged and abandoned an unproductive well there [Exhibit 20, pp. 3-4]. As a result, the revised map [Exhibit 21A] shows a total of 14 units rather than the 16 units initially proposed.
  6. The proposed well spacing units cover an area that is about 7.5 miles long and 4,000 feet wide. At present, Columbia has developed 13 wells. The area of the proposed units vary from 161.97 acres to 247.50 acres. The proposed units are rectangular due to the undulating nature of the graben structure, the location of the existing wells, and the complex nature of the reservoir [Exhibit 22, pp. 1-2, 5].
  7. The proposed size of the Bergstresser well spacing unit is 170.44 acres. [Mr. Field's March 17, 2000 Affidavit]. Since the Bergstresser well was lawfully drilled before the Department proposed to establish well spacing units in the Glodes Corners Road Field, the well is not located in the center of the proposed well spacing unit. Nevertheless, the western boundary of the proposed well spacing unit is several hundred feet from the well head.[Exhibits 5(G), 21A, and 22B; Columbia's March 17, 2000 Response (Mr. Ahmad)]
  8. The proposed western boundaries of the Bergstresser and Pizura well spacing units are defined by the tear fault. In addition, the results of Columbia's pressure test demonstrate that the existing Bergstresser well (API No.: 31-101-21710) is close to the barriers in the reservoir, which include the tear fault on the west and the graben limits to the north. [Exhibit 20, pp7-8].
  9. The separation distance in the east-west direction between existing wells in the field is about 5, 280 feet, and in the north-south direction the separation distance is about 2,000 feet. This spacing and the proposed area of the well spacing units would prevent the wasting of the resource, and would contribute to the development of spacing units that are uniform in size and shape for the entire pool [Exhibit 20, pp. 3-4].

Discussion

Procedures Governing Further Proceedings

The Notice [Exhibit 1], and the ALJ's October 28, 1999 rulings and order explained that the procedures outlined in 6 NYCRR Part 624 (Permit Hearing Procedures) would be relied upon, to the extent necessary, for guidance because the proposed action is similar to those considered in DEC permit hearings.(6) In addition, the ALJ's rulings and order directed that further proceedings would continue with the pre-filing of the Department Staff's testimony as well as the pre-filing of testimony from those who have "an interest that may be affected" by the proposed action. If the opposing filings establish a "material conflict" with the Department Staff's pre-filed information, the rulings and order stated that a hearing would be convened to provide an opportunity for cross-examination, and if necessary, to receive rebuttal evidence. The ALJ's rulings and order explained that the matter would be remanded to the Department Staff if no substantive and significant issues were raised upon review of the pre-filed testimony.

As explained above, appeals were filed on the ALJ's October 28, 1999 rulings and order. No one, however, appealed the procedures concerning further proceedings. Therefore, the procedures related to further proceedings, which are outlined in the ALJ's October 28, 1999 rulings and order, will be followed here.

Section 624.4(c) outlines the standards to be used to join an issue for adjudication. When, as here, the Department Staff have determined that a proposal, as conditioned by the stipulation [Exhibit 21], will conform to all applicable statutory and regulatory requirements, the burden of persuasion is on the prospective party advancing the issue to show that the proposed issue is both substantive and significant [6 NYCRR §624.4(c)(4)]. An issue is substantive if there is sufficient doubt about an applicant's ability to meet the applicable statutory or regulatory criteria such that a reasonable person would inquire further [§624.4(c)(2)].(7) To be substantive, the issue cannot be based merely on speculation but on facts that can be subjected to adjudication.(8)

An issue is significant if the adjudicated outcome can result in permit denial, a major modification to the proposed project, or the imposition of significant conditions in addition to those proposed in the draft permit [§624.4(c)(3)]. Based on §624.4(c)(3), I determine that an issue would be significant, with respect to the captioned matter, if the adjudicated outcome could result in a modification of the boundaries of the proposed well spacing units.

The Commissioner has further elaborated upon these standards in various administrative decisions.(9) According to Giardina, offers of expert testimony contrary to the application are not necessarily adequate, in and of themselves, to raise issues for adjudication, especially when the bases for the contrary expert opinions are not identified or have not considered all proposed mitigations.

Proposed Issue for Adjudication

As directed by the ALJ's October 28, 1999 rulings and order, the Department's pre-filed testimony [Exhibit 20 and referenced Exhibits] addresses the two matters identified in that ruling with particular attention to the concerns raised in the testimony offered by Mr. Covert and his attorney, Mr. Squires; Mr. Cronk, Mr. Fox, Mr. Bedient, Mr. Pizura and Mr. Spence. I note again that the Department and Columbia have signed a stipulation [Exhibit 21] concerning the spacing units for the Glodes Corners Road Field. Although the rulings and order provided an opportunity, none of the other parties who testified at the June 22, 1999 hearing submitted additional pre-filed testimony in opposition to the Department's pre-filed testimony, except for Mr. Spence.

Accordingly, the scope of these proceedings has narrowed significantly since they commenced in June 1999 for two reasons. First, only Mr. Spence has submitted pre-filed testimony in opposition to the Department Staff's and Columbia's. Second, there is a stipulation between the Department and Columbia concerning the spacing units for the Glodes Corners Road Field.

Based on the above, I conclude there are no substantive and significant issues related to the proposed spacing units in the Glodes Corners Road Field, on any of the aforementioned matters, with the exception of evaluating Mr. Spence's pre-filed testimony concerning the proposed Bergstresser well spacing unit. Accordingly, the following discussion summarizes

Mr. Spence's objections and his offers of proof concerning the western boundary of the proposed Bergstresser well spacing unit. The discussion then summarizes the Department Staff's and Columbia's responses. Finally, this portion of the discussion provides a legal conclusion about whether Mr. Spence's proposed issue is substantive and significant.

1. Objections by Mr. Spence

At the June 1999 hearing, Mr. Spence stated that his parents' property is located near the northwest corner of the proposed Bergstresser unit. Referring to Exhibit 5(G), Mr. Spence explained that his parents' property is immediately south of Mr. Alfano's 5.02 acre parcel [See, Appendix A]. Mr. Spence and his parents object that their property has been excluded from the proposed unit.

Mr. Spence asserts that the proposed well spacing units are arbitrary, and therefore do not meet the spacing requirements outlined in ECL Article 23, Title 5. Mr. Spence demands the full disclosure of Columbia's seismic reflection data, which he predicts will show that the Spence property should be included in the Bergstresser well spacing unit [Mr. Spence's February 25, 2000 Affidavit, pp. 1, 2, 5].

Drs. Scholz and Robinson are Professors of Geology at Syracuse University. Exhibit A to Drs. Scholz' and Robinson's February 24, 2000 affidavit provides a very brief review of Columbia's report [Exhibit 22] and its attachments. According to Drs. Scholz and Robinson, the Glodes Corners Road Field is a stream drainage channel, which could include many in-filled stream channels that would permit natural gas to migrate far beyond the boundaries of what Columbia has mischaracterized as a well-defined graven [Drs. Scholz' and Robinson's February 24, 2000 Affidavit, pp. 2-3 and attached Exhibit A].

In addition, Drs. Scholz and Robinson challenge the conclusions that Columbia made from the results of its pressure tests. They contend that the proposed western boundary of the Bergstresser well spacing unit is arbitrary because it is impossible to make conclusions concerning the boundary of a reservoir from pressure test data. Finally, Drs. Scholz and Robinson are skeptical of Columbia's finding [See, Exhibit 22B] that nearly all the production wells are located near or along the boundary of the proposed reservoir. They want an opportunity to review Columbia's seismic reflection data [Mr. Spence's February 25, 2000 Affidavit, p. 3; Drs. Scholz' and Robinson's February 24, 2000 Affidavit, pp. 2-3 and attached Exhibit A].

2. Responses from Columbia and DEC Staff

In its March 17, 2000 response, Columbia argues that the Spences have not raised a substantive and significant issue for adjudication because there is substantial scientific data available to show that the Glodes Corners Road Field is a graben and not a stream channel, as argued by Spence. According to Mr. Beardsley from Columbia, the geologic feature in question is a dolomitized cave reservoir that collapsed due to overburden pressure. Mr. Beardsley has based his conclusion on the near vertical faults that define the graben structure.

According to Columbia's Mr. Ahmad, it did not rely exclusively on the results from the pressure test in determining the limits of the natural gas reservoir in the vicinity of the Bergstresser well. Mr. Ahmad states that the results from the pressure test corroborate the seismic data which show that the Bergstresser well is isolated from the main body of the reservoir through a transcurrent (tear) fault system. Mr. Ahmad explains that the results from a pressure transient test in the Bergstresser well in November 1999 further demonstrates that the well is in a limited reservoir. Based, in part, on that data, Mr. Ahmad states that boundary effects were determined, which are consistent with the fault data.

In their March 17, 2000 response, the Department Staff contend that the January 25, 2000 stipulation between Columbia and the Department resolves any issues related to the field-wide well spacing rules and satisfies the statutory mandates set forth in ECL §23-0301, §23-0501, and §23-0901. Citing 6 NYCRR §624.4(c)(4), the Staff argue that Mr. Spence has not met his burden of persuasion to demonstrate that his proposed issue is substantive and significant, given the stipulation between the Staff and Columbia.

Although Drs. Scholz' and Robinson's affidavit proposes an alternative hypothesis about how the reservoir formed, which is different from the explanation provided by Columbia and the Department Staff, Mr. Field from the Department Staff states in his March 17, 2000 affidavit, that Drs. Scholz' and Robinson's affidavit and attached report do not include any technical data to support the conclusion that the Spence property is drained by the Bergstresser well. According to Mr. Field, Columbia relied on seismic data to develop a geological interpretation, and reservoir engineering analysis as a basis for proposing the location of the western boundary of the Bergstresser well spacing unit.

3. Discussion and Conclusion

Mr. Spence proffers the expert testimony of Drs. Scholz and Robinson who opine that the Glodes Corners Road Field is a stream drainage channel rather than a graben, as characterized by Columbia. If the reservoir is a stream drainage channel, as suggested by Drs. Scholz and Robinson, they opine further that many in-field channels may exist, which could allow natural gas to migrate beyond the boundaries of the reservoir, such as under the nearby Spence property. [Drs. Scholz' and Robinson's February 24, 2000 Affidavit, attached Exhibit A].

I am not persuaded to inquire further based on the opinion offered by Drs. Scholz and Robinson. Although their opinion is contrary to the data provided by Columbia, it is not adequate to raise a substantive issue because the basis for the contrary expert opinion has not been provided [Giardina, supra.]. Columbia, however, has provided data which demonstrates that the northern and southern boundaries of the reservoir are well defined and that the migration of natural gas in the reservoir is primarily along the east-west axis. In contrast, Drs. Scholz and Robinson have offered nothing to show that the northern and southern boundaries are not well defined. Instead, they have offered an unsubstantiated theory about how the reservoir was formed.

Mr. Spence expressly objects to the proposed location of the western boundary of the Bergstresser spacing unit. His offer of proof, however, does not challenge, or otherwise address, Columbia's documentation concerning the presence of a tear fault that isolates the natural gas reserves in the Bergstresser well spacing unit from the rest of the reservoir, and which serves as the basis for the proposed location of the western boundary of that well spacing unit.

I note further that Mr. Spence's assertion [February 25, 2000 Affidavit] concerning the lack of "justification for demarcating the Bergstresser unit just six feet from the well head," is factually baseless. The proposed maps [Exhibits 5(G), 21A and 22B] clearly show that western boundary of the proposed well spacing unit is several hundred feet from the Bergstresser well head, and not six feet as claimed by Mr. Spence.

Additionally, and contrary to Mr. Spence's assertions and the opinion of his experts, Columbia does not rely exclusively on the results from the pressure tests to identify the proposed northern and western boundaries of the Bergstresser well spacing unit. Rather, Columbia points out that the results of the pressure tests corroborate its seismic data concerning the tear fault. Mr. Spence and his experts did not offer anything that contradicts Columbia's seismic data, or that shows that the results of the pressure tests contradict (rather than substantiate) Columbia's seismic data regarding the tear fault.

Based on the forgoing, I conclude that the issue proposed by Mr. Spence concerning the location of the western boundary of the Bergstresser spacing unit is not substantive and significant. Accordingly, no further adjudication of this issue is necessary.

The January 25, 2000 Stipulation

Absent any substantive and significant issues, the adjudicatory phase of the hearing is not necessary given the stipulation between the Department and Columbia [Exhibit 21], which is incorporated by reference into this report. Based on the Report of Columbia Natural Resources Inc., on Glodes Corners Road Field [Exhibit 22], the January 25, 2000 stipulation proposes a well separation distances of 5,280 feet in the east-west direction and 2,000 feet in the north-south direction. Future units will be 240 acres. The stipulation outlines a process where an applicant who wants to drill a infill well or an extension well closer than 5,280 feet from an existing well in the field must submit technical information to the Department that explains how the proposed well would not adversely affect the productive performance of existing wells.

A minimum unit area of 240 acres addresses the requirements in ECL §23-0501(4), which prohibits units form being smaller that the maximum area that can be efficiently and economically drained by one well. Although some of the proposed well spacing units are less than 240 acres, these units include lawfully drilled wells developed prior to the initiation Department's proposed action to establish well spacing units. The size of the proposed units, however, are consistent with ECL §23-0501(3), which requires spacing units to be of approximately uniform size and shape for the entire pool.

Mr. Spence's contentions that the proposed development rules for the reservoir would inappropriately constrain development of the field are misplaced. The terms of the stipulation would allow any applicant (like Mr. Spence or his agent) who holds mineral rights within a 660-foot radius of a proposed well location, as well as the contractual right to conduct drilling operations at a particular location, to attempt to extend the Glodes Corners Field. Furthermore, requiring scientific data to justify the development of a new well closer than one mile from an existing well is consistent with the objectives of ECL §23-0301, and the requirements in ECL §§23-0501(3) and (5), which mandate the uniform size of well spacing units and consistent distances between individual wells. Section IV of the stipulation provides equal treatment to any one who may propose to extend the Glodes Corners Road Field after the Commissioner issues a final Order.

Therefore, upon review of the pre-filed materials submitted by the Department Staff and Columbia, I conclude that the stipulation resolves issues pertaining to field-wide well spacing rules, and satisfies the statutory mandates set forth in ECL §23-0301, §23-0501, and §23-0901.

Conclusions

  1. The issue proposed by Mr. Spence concerning the location of the western boundary of the Bergstresser spacing unit is not a substantive and significant issue for adjudication.
  2. Given the stipulation between the Department and Columbia, and absent any substantive and significant issues, an adjudicatory hearing about the proposed well spacing units in the Glodes Corners Road Field is not necessary.
  3. The January 25, 2000 stipulation between the Department and Columbia resolves all issues pertaining to field-wide well spacing rules, and satisfies the statutory mandates set forth in ECL §23-0301, §23-0501, and §23-0901.

Recommendation

The Commissioner should issue an Order for the Glodes Corners Road Field that establishes field-wide rules for the spacing of oil and gas wells, and which integrate the interests within the resulting spacing units.

Appendix A: A portion of Exhibit 5(G) that depicts the Spence property in relationship to the proposed boundaries of the well spacing units for the Glodes Corners Road Field.

1 ECL Article 23, Titles 5 and 9; 6 NYCRR Part 553 (Well Spacing).

2 The Notice is identified in the hearing record as Exhibit 1.

Originally, this matter also included an opportunity to review the proposed well spacing units for the Muck Farm Field (DMN 99-1), which is also located in the Towns of Pulteney and Prattsburgh, Steuben County. On October 28, 1999, ALJ Montecalvo issued Rulings after Public Hearing and Order of Disposition. Subsequently, Commissioner Cahill issued a Decision and Order dated January 31, 2000 which established five spacing units for the existing wells in the Muck Farm Field. The Commissioner issued a Modified Decision and Order dated March 9, 2000 for the Muck Farms Field to require Columbia to file a copy of the January 2000 Order with the Steuben County Clerk against all affected parcels rather than against the unleased parcels, as initially required.

3 See Matter of the Glodes Corners Road Field, Ruling on Motion to escrow

proceeds of production or to shut-in production, October 28, 1999.

4 Matter of the Glodes Corners Road Field, Rulings after Public Hearing and Order of Further Proceedings, October 28, 1999, and Matter of the Glodes Corners Road Field, Ruling on Motion to escrow proceeds of production or to shut-in production, October 28, 1999.

5 Attached as Appendix A is a copy of a portion of Exhibit 5(G), which depicts the Spences' property.

6 Also see 6 NYCRR §624.1(a)(6) concerning applicability.

7 Also see, Matter of Superintendent of Fish Culture, Interim Decision, August 19, 1999, which was affirmed in the Decision and Judgment In the Matter of Upper Saranac Lake Association, Inc., et al. v. John P. Cahill, Commissioner, et al., (Supreme Court, Albany Co., Index No. 6027-99), March 24, 2000.

8 Matter of Concerned Citizens Against Crossgates v. Flacke, 89 AD2d 759 (3rd Dep't., 1982), aff'd, 58 NY2d 919 (1983).

9 For example, Matter of Akzo Nobel Salt, Inc., et al., Interim Decision, January 31, 1996, and Matter of Jay Giardina, Interim Decision, September 21, 1990.

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