before the board of oil, gas and mining department of
TRANSCRIPT
F I LED MAR 2 1 2013
SECRETARY, BOARD OF OIL, GAS & MINING
BEFORE THE BOARD OF OIL, GAS AND MINING DEPARTMENT OF NATURAL RESOURCES
STATE OF UTAH
IN THE MATTER OF THE REQUEST FOR AGENCY ACTION OFAXIA ENERGY, LLC FOR AN ORDER AUTHORIZING THE VENTING OR FLARING OF GAS FROM THE THREE RIVERS #34-31-720 WELL LOCATED IN SECTION 34, TOWNSHIP 7 SOUTH, RANGE 20 EAST, S.L.M., IN THE THREE RIVERS PROJECT AREA OF UINTAH COUNTY, UTAH
FINDINGS OF FACT, CONCLUSIONS OF LAW,
AND ORDER
Docket No. 2013-006
Cause No. 142-08
This cause came on regularly for hearing before the Board of Oil, Gas and Mining
(the "Board") on Wednesday, February 27, 2013, at 9:00 a.m., in the Hearing Room of
the Utah Department of Natural Resources at 1594 West North Temple Street, in Salt
Lake City, Utah.
The following Board members present and participating in the hearing were:
Chairman James T. Jensen, Jake Y. Harouny, Jean Semborski, Ruland J. Gill, Kelly L.
Payne, Chris D. Hansen, and Carl F. Kendell.
Phillip Wm. Lear of Lear & Lear L.L.P. appeared on behalf of Axia Energy, LLC
("Axia"), and Tab McGinley, Carl Deitz, and Jess Peonio appeared as witnesses for
Axia.
Michael S. Johnson, Assistant Attorney General, represented the Board; and
Cameron B. Johnson, Assistant Attorney General, represented the Division of Oil, Gas
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and Mining (the "Division"). Dustin Doucet, petroleum engineer, of the Division
participated in the hearing.
NOW THEREFORE, the Board, having fully considered the testimony adduced
and the exhibits received at the hearing, and being fully advised in the premises,
unanimously makes and enters its Findings of Fact, Conclusions of Law, and Order, as
follows:
FINDINGS OF FACT
1. The Board mailed notice of the hearing to interested parties on January 30,
2013; and caused notice to be published in the Deseret Morning News and in The Salt
Lake Tribune, newspapers of general circulation in Salt Lake City and County Utah, on
February 3, 2013; in the Uintah Basin Standard a newspaper of general circulation in
Uintah and Duchesne Counties, Utah, on February 5, 2013; and in the Vernal Express, a
newspaper of general circulation in Uintah and Daggett Counties, Utah, on February 6,
2013, and February 6, 2013, respectively.
2. Axia mailed photocopies of the Request for Agency Action (sometimes
hereinafter "Request") to the last known address of all interested parties having interests
in the subject matter of this hearing by certified mail, return receipt requested, on January
10,2013; and electronically delivered a copy to Wasatch Oil & Gas on February 1,2013,
and by U.S. First Class Mail on February 4,2013, at Wasatch Oil's request.
3. Axia is a Delaware limited liability company in good standing, having its
principal place of business in Denver, Colorado. Axia is authorized to do, and is doing,
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business in the State of Utah, and has valid bonds in place with relevant federal and state
agencies.
4. Axia owns 100% of the working interests in the mineral estates and lands
that are the subject matter of the Request, all of which are private (fee) lands subject to
oil and gas leases held by Axia.
5. Axia is the operator of the Three Rivers #34-31-720 Well in Uintah
County, Utah, the well that is the subject matter of this hearing (hereinafter the "Well").
The Well is located NWV4NEV4 of Section 34 of Township 7 South, Range 20 East,
S.L.M.
6. Axia completed the Well on January 8, 2012 (Wasatch) and May 31, 2012
(Green River), as a well capable of producing gas from the Green River and the Upper
200 feet of the Wasatch formations.
7. Cumulative production to date is 15.3 thousand barrels of oil ("MHO")
and 13.8 million cubic feet of gas ("MMCF").
8. The current rate of oil and gas production is 87 BOPD and 117 MCFD,
respectively. The chemical analysis for the Well introduced at the hearing disclosed that
the Well produces no dangerous or toxic gases that would be released or vented by
flaring.
9. The Gas to Oil ratio ("GOR") is 0.9 MCF/BO (cumulative) and 1.25
MCF IBO after installing the submersible pump.
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10. The estimated ultimate recoverable gas reserves are 175 MBO and 201
MMCF. Axia derived the estimated oil and gas reserves based upon production to date
and production modeling.
11. Axia analyzed marketing and conservation-oriented alternatives to gas
flaring, namely, compressed natural gas (CNG), gas to liquids (GTL), gas to wire
(electrical generation), gas injection, use on lease, and a natural gas pipeline. None of the
alternatives considered are technologically feasible or economical alternatives to gas
flaring.
12. The discounted present value of oil and gas reserves, including the well
and gas pipeline costs, is negative $922,000. The well cost is $3.65 Million and the gas
pipeline cost is $694,000. The current oil pricing is $94.26 BO, excluding the black wax
discount; and the current gas pricing is $3.43 per MMBTU.
13. Of the possible conservation alternatives considered, the gas pipeline
alternative comes the closest to an economically possible alternative. The distance to tie
in with the existing QEP Resources, Inc. ("QEP") line is 6.4 miles south-southwest of
the Well. The total pipeline costs would be $694,000, including a QEP tie-in charge of
$275,000; road crossing, valves, fencing, and associated costs of $150,000; and pipeline
construction, right-of-way, reclamation and associated costs of $268,827 (33,900 feet at
$7.93 per foot).
14. Axia has drilled eleven wells in its Three Rivers Project area. Nine wells
are producing and two wells are awaiting completion.
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15. A natural gas pipeline would be the most technologically and
economically feasible option, looking to the future.
16. Axia has contacted Bill Barrett Corporation ("DDC") regarding its
proposed pipeline that will run just north of the Well. To date, Axia has been unable to
determine what the terms of a BBC connection would be, assuming that there will be
sufficient capacity on the BBC line and that Axia gas would meet BBC's pipeline
specifications and pressures. Axia will choose the most economically advantageous route
for gathering and transporting its gas.
17. Axia cannot produce oil without producing the associated gas. Absent a
market for the gas, the Well must be shut-in if gas is not flared. Axia's projected lost
revenues from production for the period ending December 31,2013, would be $853,756
based upon a field price of $94.26 (per barrel), if the Board does not authorize continued
flaring for the Well.
18. An order authorizing Axia to continue flaring its gas from the Well
pending further analysis of data from the Well and from other wells Axia has drilled in its
Three Rivers Project area will promote the public interest, increase ultimate recovery,
prevent waste, and protect the correlative rights of all owners.
CONCLUSIONS OF LAW
1. The Board has jurisdiction of the parties and of the subject matter of the
Request for Agency Action pursuant to Chapter 6 of Title 40 of the Utah Code
Annotated.
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2. The Division gave due and regular notice of the time, place, and purpose
of the hearing to all interested parties as required by law and by the rules and regulations
of the Board.
3. The Well is capable of producing gas in excess of the 1,800 MCF/month
authorized by R649-3-20.1.1 of the Utah Administrative Code without approval of the
Board upon notice and hearing, and the Board's approval is required for continued gas
flaring.
4. No marketing or conservation-oriented alternatives are feasible and
economically viable to gas flaring in the Well.
5. An order authorizing Axia to temporarily flare the associated gas from the
Well will promote the public interest, increase ultimate recovery of oil and gas, prevent
waste, and protect the correlative rights of all owners.
ORDER
IT IS THEREFORE ORDERED that in order to promote the public interest; to
increase the ultimate recovery of the resource; to prevent physical waste of gas and
associated hydrocarbons; and to protect the correlative rights of all owners:
A. Axia's Request for flaring of the Well is granted, as modified in this
Order.
B. Axia is authorized to flare a total of 24,000 MCF for a period of eight
calendar months, or the arithmetic equivalent of 3,000 MCF per month, commencing
March 1,2013, and running through October 31, 2013 without regard to specific daily or
monthly volumes. Axia may modulate its production to maximize its monthly oil
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production; provided, however, that Axia must cease flaring at that point that the total gas
flared reaches the 24,000 MCF-limit established by this Order. Upon reaching a total of
24,000 MCF gas flared or at the end of the eighth-month period, whichever is the earlier,
this Order shall expire; and thereafter Axia's right to flare will again be governed by
R649-3-20 of the Utah Administrative Code.
C. This Order will not be continued or extended.
D. Nothing in this Order is intended to preclude Axia from seeking additional
agency action before the Board regarding flaring from the Well following expiration of
this Order. However, Axia will be required to re-invoke the Board's jurisdiction by filing
a new request for agency action.
E. The expiration of this Order shall not preclude Axia from petitioning the
Board for relief from the gas flaring limitations established in R649-3-20 under a new
request for agency action.
F. The Division is to monitor the gas flare rates and production from the
Well and Axia's Three Rivers Project Area.
G. The Board retains continuing jurisdiction of this matter and the flaring
authorization.
H. The Board has considered and decided this matter as a formal
adjudication, pursuant to the Utah Administrative Procedures Act, Utah Code Ann. §§
63G--4-204 through -207, and of the Rules of Practice and Procedure before the Board of
Oil, Gas and Mining, Utah Admin. Code R641 (2011).
I. These Findings of Fact, Conclusions of Law, and Order ("Order") are
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based exclusively upon evidence of record in this proceeding or on facts officially noted,
and constitutes the signed written order stating the Board's decision and the reasons for
the decision, as required by the Utah Administrative Procedures Act, Utah Code Ann. §
63G-4-208 (2008), and the Rules of Practice and Procedure before the Board of Oil, Gas
and Mining, Utah Admin. Code R64I-I09 (2011); and constitutes a final agency action
as defined in the Utah Administrative Procedures Act and Board rules.
J. Notice of Right of Judicial Review by the Supreme Court of the State
of Utah. The Board hereby notifies all parties to this proceeding that they have the right
to seek judicial review of this Order by filing an appeal with the Supreme Court of the
State of Utah within 30 days after the date this Order is entered. Utah Code Ann. § 63G-
4-208(f) (2008).
K. Notice of Right to Petition for Reconsideration. As an alternative, but
not as a prerequisite to judicial review, the Board hereby notifies all parties to this
proceeding that they may apply for reconsideration of this Order. Utah Code Ann. §
63G-4-208(1)( e) (2008). The Utah Administrative Procedures Act provides:
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(1) (a) Within 20 days after the date that an order is issued for which review by the agency or by a superior agency under Section 63G-4-30I is unavailable, and if the order would otherwise constitute final agency action, any party may file a written request for reconsideration with the agency, stating the specific grounds upon which relief is requested. (b) Unless otherwise provided by statute, the filing of the request is not a prerequisite for seeking judicial review of the order. (2) The request for reconsideration shall be filed with the agency and one copy shall be sent by mail to each party by the person making the request.
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(3)(a) The agency head, or a person designated for that purpose, shall issue a written order granting the request or denying the request. (b) If the agency head or the person designated for that purpose does not issue an order within 20 days after the filing of the request, the request for reconsideration shall be considered to be denied.
Utah Code Ann. § 63G-4-302 (2008).
The Rules of Practice and Procedure before the Board of Oil, Gas and Mining
entitled "Rehearing and Modification of Existing Orders" state:
Any person affected by a final order or decision of the Board may file a petition for rehearing. Unless otherwise provided, a petition for rehearing must be filed no later than the 10th day of the month following the date of signing of the final order or decision for which the rehearing is sought. A copy of such petition will be served on each other party to the proceeding no later than the 15th day of that month.
Utah Admin. Code R641-11 0-1 00 (2011).
The Board hereby rules that, should there be any conflict between the deadlines
provided in the Utah Administrative Procedures Act and the Rules of Practice and
Procedure before the Board of Oil, Gas and Mining, the later of the two deadlines shall be
available to any party moving to rehear this matter. If the Board later denies a timely
petition for rehearing, the aggrieved party may seek judicial review of the order by
perfecting an appeal with the Utah Supreme Court within 30 days thereafter.
L. The Board retains exclusive and continuing jurisdiction of all matters
covered by this Order and of all parties affected thereby; and specifically, the Board
retains and reserves exclusive and continuing jurisdiction to make further orders as
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appropriate and authorized by statute and applicable regulations.
M. The Chainnan's signature on a facsimile copy of this Order shall be
deemed the equivalent of a signed original for all purposes.
ENTEREDthis1~Of ~ , 2013.
STATE OF UTAH BOARD OF OIL, GAS AND MINING
Approved as to Form:
Attorney General for the State of Utah
By: --------~-----------------Cameron B. Johnson Attorney for the Division of Oil, Gas and Mining
LEAR & LEAR L.L.P.
By: __ ~ ____________________ _ Phillip Wm. Lear Megan B. Parkinson Attorneys for Axia Energy, LLC
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CERTIFICATE OF SERVICE
I hereby certify that I caused a true and correct copy of the foregoing FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER for Docket No. 2013-006, Cause No. 142-08 to be mailed via E-Mail.andFirstClassMail.withpostageprepaid.this 22nd day of March, 2013, to the following:
Phillip Wm. Lear Lear & Lear LLP Attorney for Petitioner The Downey Mansion 808 East South Temple Street Salt Lake City, UT 84102 [email protected] [email protected]
Michael S. Johnson Assistant Attorney General Utah Board of Oil, Gas & Mining 1594 West North Temple, Suite 300 Salt Lake City, UT 84116 [email protected]
Steven F. Alder Assistant Attorney General Utah Division of Oil, Gas & Mining 1594 West North Temple, Suite 300 Salt Lake City, UT 84116 [email protected]
Axia Energy, LLC Attn: Jess A. Peonio 1430 Larimer, Suite #300 Denver CO 80202
Lynn Rodger Calder 2611 South 450 East Bountiful, Utah 84010
John Richard Calder Rev Trust 1690 Mountain Circle Fruit Heights, Utah 84037
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Rosemary Rogers P.O. Box 1364 Bountiful, Utah 84011
E. J. Winder Family LLC 813 Canyon View Drive, #416-1 Roosevelt, Utah 84066
Suzanne Okelberry PO Box 1481 Bountiful, Utah 84011
Joann W Hunting 2575 South 2400 East Vernal, Utah 84078
Irene Calder Berkoff, Trustee of the Calder Family Trust Acknowledged May 16,2012 21797 SW Oak Hill Lane Tualatin, Oregon 97062
Bret Calder, Co-Trustee Calder Irrevocable Trust 742 East Sandy Dune Circle Sandy, Utah 84094
Stonegate Resources, LLC P.O. Box 680667 Park City, Utah 84068-0667
Wasatch Oil& Gas, LLC 1010 North 500 East, Suite 320 North Salt Lake, Utah 84054