HomeMy WebLinkAbout20052657.tiff HEARING CERTIFICATION
DOCKET NO. 2005-67
RE: SITE SPECIFIC DEVELOPMENT PLAN AND USE BY SPECIAL REVIEW PERMIT #1514
FOR AN OIL AND GAS PRODUCTION FACILITY(TWO OIL AND GAS WELLS) IN THE
I-1 (INDUSTRIAL) ZONE DISTRICT - PETRO-CANADA RESOURCES (USA) INC.
A public hearing was conducted on September28,2005,at 10:00 a.m.,with the following present:
Commissioner William H. Jerke, Chair
Commissioner M. J. Geile, Pro-Tem
Commissioner David E. Long
Commissioner Robert D. Masden
Commissioner Glenn Vaad
Also present:
Acting Clerk to the Board, Esther Gesick
Assistant County Attorney, Lee Morrison
Planning Department representative, Sheri Lockman
Health Department representative, Char Davis
Public Works representative, Donald Carroll
The following business was transacted:
I hereby certify that pursuant to a notice dated September 9, 2005, and duly published
September 14, 2005, in the Fort Lupton Press, a public hearing was conducted to consider the
request of Petro-Canada Resources(USA)Inc.,for a Site Specific Development Plan and Use by
Special Review Permit#1514 for an Oil and Gas Production Facility(two oil and gas wells) in the
I-1 (Industrial)Zone District. Lee Morrison,Assistant County Attorney,made this a matter of record.
Sheri Lockman, Department of Planning Services, presented a brief summary of the proposal,
entered the favorable recommendation of the Planning Commission into the record as written,and
gave a brief description of the location of the site and surrounding land uses. She stated the major
issue of concern is a surface use dispute between the applicant and the surface owner, BROE
Land Acquisitions, II, LLC. Ms. Lockman stated BROE took possession of the property from
Eastman Kodak with the mineral lease already in place,and the Use by Special Review application
was submitted to the County prior to BROE taking ownership. She stated BROE does have a
pending annexation request with the Town of Windsor,which is anticipated to be completed by the
end of January 2006. (Switched to Tape #2005-36.) Ms. Lockman submitted a packet of
correspondence, marked Exhibit Z.
Char Davis, Department of Public Health and Environment,stated staff is recommending the use
of portable toilets and bottled water during the construction phase of the project. Responding to
Chair Jerke, Ms. Davis confirmed this use is under County review because it is located in the
I-1 (Industrial) Zone District.
Donald Carroll, Department of Public Works, stated the site will be accessed from Weld County
Road 23,which is a local gravel road. He stated the Town of Windsor does have applications for
the Great Western Annexations#2,#3,and#4,which indicate the location of Crossroads Boulevard,
which would intersect with O Street at the approximate location of one of the proposed wells. In
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response to Commissioner Geile, Mr. Morrison stated the County retains its' land use regulation
authority,to the extent it does not create an operational conflict with the authority of the Colorado Oil
and Gas Conservation Commission, which would materially impede the State's purpose in
regulating drilling. He stated it will be necessary to hear further testimony before determining
whether there is potential for preemption. He further stated denial of a request which prevents an
oil and gas operator from drilling in the allowed area could constitute a violation of the preemption
provisions. Mr.Morrison suggested allowing publictestimonyand then addressing specific issues.
Responding to Commissioner Masden, Mr. Morrison stated all of the preemption cases address
land use authority; however, in this case the Board does need to address the issue of the roads,
which have not yet been constructed.
Mike Wozniak represented the applicant and stated this request is for two wells in the Industrial
Zone,which requires a Use by Special Review Permit. He stated although industrial development
is being proposed on the subject site,it currently does not exist. He stated the applicant entered into
a lease with Eastman Kodak,which had no surface limitations. He further stated BROE acquired
the property in May or June of 2005; however, prior to the purchase they met and discussed the
proposed oil and gas activities,and provided notification to Kodak,which was forwarded to BROE.
Mr. Wozniak stated they have been issued vertical drilling permits within the established drilling
windows of record, and BROE has long-term development plans for an industrial park,which may
create some conflict with the drilling activities. He stated the Planning Commission requested the
applicant meet with BROE prior to scheduling the Board of Commissioners hearing, and he
submitted a list of proposed alternatives, marked Exhibit T. He reiterated they have two State Oil
and Gas permits. Mr.Wozniak concurred that the County should retain its'land use authority and
jurisdiction regarding roads,with operational conflicts reverting back to the Colorado Oil and Gas
Conservation Commission. He further stated the applicant should be able to accommodate,within
the two drilling windows,the proposed expansion of O Street. He stated the applicant has not been
able to make a reasonable accommodation because they have no agreement with BROE for
accessing the two surface drilling windows. He explained BROE has requested the applicant locate
south of the subject site and drill directionally. The applicant feels the proposal is compatible with
the current state of the property,which is currently a field,and they should be able to complete the
drilling before the proposed surface uses commence. He stated this use is consistent with the
existing I-1 Zone District and current uses, and this request would promote the reasonable and
orderly development of mineral resources,as required under Section 22-5-80.B of the Weld County
Code.
Chuck Pollard represented the applicant and stated the technology is available to directionally drill;
however, it is not very feasible at this location. He stated there is some concern with getting all of
the mineral reserves out of the ground. He stated directional drilling would result in a distance of
1,350 to 1,800 feet. He gave a brief explanation of the effects of the gas/oil ratio(GOR),and stated
in this area there is a 3,000 GOR,which complicates their ability for getting all of the oil out of the
ground. He stated it would be necessary to use a plunger lift or other artificial lift system to remove
the mineral reserves, and the applicant would prefer to drill vertically to eliminate the risks and
reduce the cost. He further stated the primary concern is how much of the reserve will be left in the
ground due to difficulties with artificial lift systems. Responding to Com missioner Geile,Mr.Pollard
stated any oil and gas business must be able to economically justify the drilling of wells,and there
are some other areas where the applicant would like to directionally drill but has not been
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economically able to do so. He stated they are still researching other options, which are not yet
proven,and they have found that the plunger lift system works best in this area. He further stated
if he were representing future development of this property, he would still recommend the straight
vertical drilling of this site. Responding to Commissioner Vaad,Mr.Pollard referred to Exhibit U,and
explained the distances shown represent the separation between the existing well location and the
surface location of the proposed wells. Commissioner Vaad referred to a letter dated June 14,
2005,to Mr.Stone,and Mr.Pollard referred that question to another representative of the applicant,
Ed McLaughlin. In response to Commissioner Masden, Mr. Pollard stated the preliminary estimate
is that one-fourth to one-half of the potential reserve may be lost,and BROE has not agreed to pay
the difference in production. Commissioner Long stated the Colorado Oil and Gas Conservation
Commission has indicated support for the new drilling technology. Mr. Pollard stated the drilling
technology is not a problem;however,the technology for artificially lifting the reserves is a concern.
He explained 14,000 GOR justifies directional drilling;however,in this area there is only3,000 GOR,
which is not enough to bring the oil to the surface. In response to ChairJerke,Mr.Pollard stated the
east and southeastern portions of Weld County typically have a higher GOR. Commissioner
Masden commented the geological formation also has a lot of bearing on the GOR,and Mr. Pollard
concurred.
Mr. Wozniak stated he spent a lot of time arguing before the Colorado Oil and Gas Conservation
Commission as to why directional drilling will work. He stated typically downhole issues are within
the scope of the Colorado Oil and Gas Conservation Commission, to avoid jurisdictional issues.
Responding to Commissioner Vaad's earlier question, Ed McLaughlin represented the applicant,
and stated BROE is entitled to 7.227 percent of the revenues generated by the well because it owns
half the minerals that are leased to Petro-Canada. He stated they discussed the option of offsetting
some of the up-front costs of directional drilling; however, that discussion ended when BROE
indicated there were no other alternate drilling locations on any of the lands it has acquired.
Alex Yeros represented BROE,and stated they do not object to the proposed activity;however,they
do not like the proposed well locations and have suggested alternate sites. He stated the surface
locations directly conflict with their surface development plans. Mr.Yeros stated several years ago
he worked with Weld County to help locate the Owens-Illinois facility in this area by creating a
public/private partnership to establish the proper zoning for the intended business. He stated BROE
also went forward with acquiring land and working to prepare the area for future industrial
development. He stated the timing of business changes at Eastman Kodak allowed BROE to
acquire Kodak's excess property assets,and he displayed a posterboard, marked Exhibit V,which
he reviewed for the record. He stated there will be a sizable economic benefit to Weld County in
allowing the proposed development to proceed. Mr. Yeros stated BROE began the planning
process with the Town of Windsor, and the annexation process should be done by the end of the
year. He stated the applicant indicated they are just drilling in an empty field;however,from BROE's
perspective,they are dealing with plans that deal with streets,curb and gutter,etcetera. Mr.Yeros
displayed a poster board,marked Exhibit W,showing the future design. He stated the anticipated
conflict revolves around the proposed drilling locations which will be in the center of a proposed
industrial site and in the center of Crossroads Boulevard. He stated Crossroads Boulevard will
carry a significant amount of traffic out of downtown Windsor and in the future it will connect
Greeley with the Centerra project. He compared this development to that of the Owen-Illinois
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property, and suggested this type of conflict would have had a very bad outcome on that project.
In response to Commissioner Geile, Mr. Yeros stated BROE was aware of the lease with Petro-
Canada when it purchased the property,and he clarified BROE purchased the surface use and 100
percent of the mineral rights, of which Petro-Canada has a lease. He further stated BROE earns
approximately 15 percent.
Mike Morgan represented BROE and read a portion of paragraph 19 of the lease for the record. He
stated BROE should not be held financially accountable for Petro-Canada's attempt at compliance
with the County Code. He stated the applicant has the burden of showing compatibility with future
uses,or they are not eligible for a Use by Special Review Permit. He stated the surface locations
are in direct conflict with the zoned uses and roads that are planned by BROE. The applicant
maintains they are not in conflict with the existing uses; however, the other issue is whether they
are in compliance with future zoned uses. Mr. Morgan stated it is in BROE's interest to recover the
mineral resources; however, they are requesting the Board include the condition for directional
drilling. Mr.Morgan submitted a packet of affidavits, marked Exhibit X,and stated this is adequate
evidence that directional drilling is feasible. He also displayed a poster board showing data for
directional drilling which the applicant did on an 80-acre site just north of the subject site,which they
deemed economicallyfeasible. He stated directional drilling will have additional costs associated;
however, the applicant agreed to that in the lease. He stated the County is pre-empted from
designating the downhole windows and spacing;however,there is no definite answer as to whether
the local authority has jurisdiction to address the surface location of the wells. He stated the
Colorado Oil and Gas Conservation Commission does not regulate surface locations; that is
typically a matter of discretion for the oil and gas company to be coordinated with the surface use
owner. He stated because the wells impact surface uses and future County roads,the County does
have a right to coordinate that issue. Mr. Morgan stated the applicant has failed to comply with the
Code without agreeing to directional drilling from an alternate location.
Mr. Yeros stated BROE owns the minerals, it is coordinating with the Town of Windsor for
development of the site,and directional drilling is feasible in this location. He stated if this permit is
approved, he requested the Board include a condition which requires the applicant to locate the
wells in a consolidated location as recommended by BROE. He stated the uses are compatible if
the location is right. He further stated the County is urbanizing and it needs to consider what should
be the appropriate accommodation between surface and mineral owners. Mr. Morrison stated the
lease referred to by Mr. Morgan is in the Deeds portion of the file.
Mr.Wozniak stated BROE purchased the subject property with knowledge of the approved drilling
windows,and the applicant has leased mineral rights on this site for more than 20 years. He further
stated BROE has not offered to purchase the lease, the property is currently vacant agricultural
land, and it is very likely the drilling can be completed before the surface use commences. He
referred to the affidavits, marked Exhibit X, and stated some of the comments are unclear as to
whether subsequent drilling operations were successful after the initial drilling operations.
In response to Commissioner Geile,Mr.Morrison stated the issue is whether the County permit will
affect the surface location of the well,and in so doing, is it creating an operational conflict which is
clearly within the jurisdiction of the Colorado Oil and Gas Conservation Commission regarding the
downhole location. He stated the other issue is the language of the lease,and the third issue is the
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location of the road and whether preemption applies when dealing with the County's jurisdiction over
roads. Responding to Commissioner Vaad, Mr. Morrison stated the lease clearly addresses costs
resulting from this process,which would include the additional costs of directional drilling,if required
by the Board.
Commissioner Geile stated BROE was aware of the lease when it purchased the property. Mr.
Morrison stated the application to drill establishes the right to a downhole location within the drilling
window, not the surface location. Responding to Commissioner Geile, Ms. Lockman stated
yesterday she received the annexation packets from the Town of Windsor, and it appears the
process should be completed by January 2006. Responding to Commissioner Masden, Mr.
Morrison stated the drilling windows allow for vertical drilling anywhere in that space,but the operator
still has to consult with the surface owner as to where that location will be. He stated the surface
owner consultation can result in a drilling location outside the window. Mr. Wozniak stated the
surface consultation took place with Eastman Kodak in January 2005, which resulted in vested
rights. Mr. Yeros stated the Colorado Oil and Gas Conservation Commission establishes the
downhole location. Mr. Morrison stated he is not certain that there is a vested right that preempts
the County's surface right authority regarding the roads.
Commissioner Geile stated within 2.5 months the Town of Windsor will annex the property, and
today's decision may affect future plans for the area.
Chair Jerke stated he has heard no testimony that indicates the applicant's oil and gas interest is
not dominant. He stated it appears to be a battle of giants, with both potentially generating large
amount of revenue for Weld County. He stated he supports the application and the rights of the
mineral owner;however,he would like the applicant to work with BROE and potentially directionally
drill at least one well.
Commissioner Geile stated he does not want to get in the position of taking jurisdiction over issues
that have already been resolved.
Commissioner Masden stated the lease was in place,drilling windows were established,and BROE
should have known the lease was in existence for the intended sites. He stated the operator can
move the surface location within the drilling windows,so he feels they should be able to work with
the surface owner or possibly do directional drilling. Regardless, they have a right to drill in this
area, and it is compatible with the Industrial Zone District.
Commissioner Vaad stated if the Board includes a Condition that requires directional drilling of the
wells,then would be up to someone else to determine what the costs are and who is responsible.
He stated the Colorado Oil and Gas Conservation Commission establishes the drilling window at
the bottom of the hole, and then throughout the process the surface location is established to
connect the two. Mr.Morrison stated the applicant contends they had also established the surface
location of the drilling window. Commissioner Vaad stated he is persuaded of BROE's
foreknowledge of the lease and intended uses, which should be allowed regardless of the
intervening land use decisions.
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Commissioner Long stated he is struck with the inability to come to an agreement; however, the
lease was in place, which he does not feel the Board has the authority to preempt.
Commissioner Masden added he feels the proposed use is compatible because there are 400 wells
in the incorporated area of the City of Greeley,operating in urban areas. He stated in southern Weld
County there are similar situations where the well locations are incorporated into the development
design.
Responding to Chair Jerke, Mr.Wozniak stated he and the applicant have reviewed and concur with
the Conditions of Approval and Development Standards as proposed.
Commissioner Masden moved to approve the request of Petro-Canada Resources(USA)Inc.,for
a Site Specific Development Plan and Use by Special Review Permit#1514 for an Oil and Gas
Production Facility ( two oil and gas wells) in the I-1 (Industrial) Zone District, based on the
recommendations of the Planning staff and the Planning Commission, with the Conditions of
Approval and Development Standards as entered into the record. The motion was seconded by
Commissioner Geile, and it carried unanimously. There being no further discussion, the hearing
was completed at 12:05 p.m.
This Certification was approved on the 3rd day of October 2005.
Imo"`
APPROVED:
,t\\ ELkS BOARD OF COUNTY COMMISSIONERS
���� WELD COUNTY, COLORADO
a- *, j�I � /
"�� •� William H. ce, Chair
® '[ ,, Clerk to the Board
�. M. ile, Pro-Tem
BY: ? 4I
D�.utyCI- kto the Bo"�. L ' c.
D 'd . on
TAPE #2005-35 and #2005-36
Robert D. asd n
DOCKET#2005-67
Glenn Vaad
2005-2657
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EXHIBIT INVENTORY CONTROL SHEET
Case USR#1514 - PETRO-CANADA RESOURCES (USA) INC.
Exhibit Submitted By Exhibit Description
A. Planning Staff Inventory of Items Submitted
B. Planning Commission Resolution of Recommendation
C. Planning Commission Summary of Hearing (Minutes 07/05/2005)
D. Clerk to the Board Notice of Hearing
E. BROE Letter re: Drilling Costs (06/30/2005)
F. Applicant Letter re: Drilling Locations (07/13/2005)
G. Applicant Letter re: Alternative Offer(07/13/2005)
H. Applicant Letter re: Latest Updates (07/18/2005)
BROE Letter re: Surface Rights (07/26/2005)
J. Beatty & Wozniak, P.C. Letter re: Lack of Agreement with BROE
(08/18/2005)
K. BROE Letter re: Response to Letter from Beatty&
Wozniak, P.C. (08/26/2005)
L. Planning Staff Memo re: Status of Applicant
M. Planning Staff Letter from BROE re: correspondence with
Applicant, dated 09/13/2005
N. Planning Staff Letter from BROE re: Economic Analysis,
dated 09/19/2005
O. Planning Staff Letter from BROE re: Directional drilling,
dated 09/20/2005
P. BROE Letter of Opposition, dated 09/19/2005
Q. Pat Broe Letter of Concern, dated 09/23/2005
R. BROE Letter of Opposition, dated 09/23/2005
S. Planning Staff Certification and Photo of sign posting
T. Mike Wozniak List of Alternatives offered by applicant
U. Mike Wozniak Two maps: Well Locations and BROE Land
Acquisitions
V. Alex Yeros Site layout map of proposed surface uses
by BROE
W. Alex Yeros Proposed Land Uses Map, dated July 2005
X. Mike Morgan Affidavits packet
Y. Mike Morgan Great Western Oil and Gas Well Profile
Data (5 pages)
Z. Planning Staff Various Correspondence not previously
entered into the record:
- Petro-Canada (09/21/05)
- Beatty& Wozniak (09/12/05)
- Dorsey/Michael Wozniak (7/01/05)
- BROE (06/30/05)
- Petro-Canada (06/14/05)
- BROE (06/07/05)
ATTENDANCE RECORD
HEARINGS ARE AS FOLLOWS ON THIS 28TH DAY OF SEPTEMBER, 2005:
DOCKET#2005-67 - PETRO-CANADA RESOURCES (USA) INC.
PLEASE legibly write or print your name and complete address.
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