IN THE MATTER OF THE PROMULGATION )
AND ESTABLISHMENT OF FIELD RULES TO ) Cause No.
GOVERN OPERATIONS IN THE GREATER ) 232
WATTENBERG AREA AS DEFINED IN RULE ) Order No.
318A,
Blue Chip Oil, Inc. (“Applicant”) hereby applies to the Colorado Oil and Gas Conservation Commission (the “Commission”) for an order segregating the SW/4 of Section 22, T5N, R67W (the “Land”) from the SE/4 of said Section 22 for the production of natural gas and associated hydrocarbons from the J-Sand formation and in support thereof states as follows:
1. Applicant is an owner and the operator of oil and gas leases
covering the SW/4 of Section 22, T5N, R67W, 6th P.M.,
2. Mineral Resources, J.V. is also an owner of the Leases.
3. The Land is included in the area covered by Cause 232 that established 320-acre drilling and spacing units for the production of oil and natural gas from the J-Sand formation with one well allowed in each such drilling and spacing unit that is to be located in the NE/4 and the SW/4 or the NW/4 and the SE/4 of each section no closer than 990 feet to the boundaries of the relevant quarter section. In Order No. 232-20, the Commission allowed a second well to be drilled on each 320-acre drilling and spacing unit.
4. The Land is also covered by Rule 318A of the rules of the Commission and pursuant to that rule, operators may utilize any one or more of 5 “drilling windows” within a quarter section to access any or all of the Cretaceous Age formations from the base of the Dakota formation to the surface.
5. Rule 318A. d. provides that Rule 318A. does not alter the size or configuration of drilling units in the Greater Wattenberg Area and as a result, the J-Sand formation in and under Section 22 above described remains subject to the provisions of Cause 232 and the requirements thereof unless modified by appropriate order of the Commission.
6. Applicant drilled and completed the Andrews 13-22 Well in the NW/4SW/4 of Section 22 above described into the J-Sand formation (the “Well”) and the Well has produced and is capable of producing natural gas and associated hydrocarbons from the J-Sand formation.
7. The drilling and spacing unit for the Well as designated in the APD is the S/2 of Section 22 above described.
8. Prima Oil & Gas Company is the Owner, as defined by the rules of the Commission, in the SE/4 of Section 22 above described and has entered into a segregation agreement with Applicant, a copy of which is attached, pursuant to which Prima and Applicant have agreed to and have segregated the SW/4 and the SE/4 of Section 22 as to production from the J-Sand formation and for working interest purposes.
9. The segregation of the working interest was accomplished to protect the correlative rights of the Owners in the S/2 of Section 22 above described to ensure that each such Owner has the opportunity to recover his just and equitable share of the natural gas and associated hydrocarbons produced and to be produced from the J-Sand formation.
10. The segregation agreement does not affect the owners of the landowners’ and overriding royalty interests in and to production from the S/2 of Section 22 above described.
11. Consistent with the findings in the rulemaking that resulted in the adoption of Rule 318A and in order to protect the correlative rights of the owners of the landowners’ and overriding royalty interests in and to production from the J-Sand formation in and under the S/2 of Section 22 above described, and to ensure that each such owner has the opportunity to recover his just and equitable share of the natural gas and associated hydrocarbons produced and to be produced from the J-Sand formation, it is necessary to segregate the SW/4 of Section 22 from the SE/4 of said Section 22 for royalty payment purposes.
WHEREFORE, Applicant requests an order from the Commission segregating the SW/4 of Section 22 above described from the SE/4 of said Section 22 for production of natural gas and associated hydrocarbons from the J-Sand formation.
Dated this __ day of April 2004.
Respectfully Submitted,
KEITH M. CROUCH, P.C.
By: ___________________________
Keith M. Crouch
Attorney At Law
5015 Ingersoll Pl.
Boulder, CO 80303
303-929-7016
303-444-5624 fax
STATE OF COLORADO )
)ss.
COUNTY OF WELD )
Carl B. Friis, of lawful age, being first duly sworn upon oath, deposes and says that he is a consultant to Blue Chip Oil, Inc., the Applicant herein, and that he has read the foregoing application, knows the contents thereof and that the same are true to his best knowledge and belief.
______________________________
Carl B. Friis
Subscribed and sworn to before me this __ day of April 2004.
Witness my hand and official seal.
My Commission expires: __________________
______________________________
Notary Public