BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO

REPORT OF THE COMMISSION

            This cause came on for hearing before the Commission on February 22, 2010, at 9:00 a.m., in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of Mike Sutak and Laura W. Chase for an order determining that certain lands in Township 5 North, Range 68 West, 6^th P.M. constitute a designated outside activity area in accordance with Commission Rule 603.b and its 100-Series Rules (definitions).

FINDINGS

                        The Commission finds as follows:

1.      Mike Sutak and Laura W. Chase (“Sutak and Chase”), as applicants herein, are interested parties in the subject matter of the above‑referenced hearing.

                        2.  Due notice of the time, place and purpose of the hearing has been given in all respects as required by law.

                        3.  The Commission has jurisdiction over the subject matter embraced in said Notice, and of the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order.

4.  On November 17, 2009, Sutak and Chase, by their attorney, filed with the Commission a verified application for an order to designate Moqui Meadows as a designated outside activity area (“DOAA”).  Moqui Meadows is comprised of 77.599 approximate acres located on a portion of the following land:

                        Township 5 North, Range 68 West, 6^th P.M.

                        Section 36: W½ SE¼

as more specifically described below:

Parcel I:

That portion of the W½ of the SE¼ of Section 36, Township 5 North, Range 68 West, 6th P.M., described as follows:

Considering the West line of said SE¼ of Section 36, as monumented with a #6 rebar 30 inches long with a 2-½ inch aluminum cap L.S. #17662 at the center of Section and at the South quarter corner of said Section 36, as bearing North 00 degrees, 7 minutes, 33 seconds East and with all bearings contained herein relative thereto.

Beginning at said South quarter corner of Section 36; thence along said West line of the southeast quarter North 00 degrees, 7 minutes, 33 seconds West 1256.52 feet to the true point of beginning; thence continuing along said North line North 00 degrees, 7 minutes, 33 seconds West 1384.69 feet to the center quarter corner of said Section 36; thence along the North line of said West half of the southeast quarter North 89 degrees, 57 minutes, 52 seconds East 1328.94 feet to the East line of said West half of the southeast quarter North 89 degrees, 57 minutes, 52 seconds East 1328.94 feet of the East line of said West half of the southeast quarter of Section 36; thence along said East line South 00 degrees, 03 minutes, 29 seconds West 1396.43 feet; thence North 89 degrees, 31 minutes, 40 seconds West 1324.53 feet to the true point of beginning. Containing 42.352 acres more or less.

Parcel II:

That portion of the W½ of the SE¼ of Section 36, Township 5 North, Range 68 West, 6th P.M., described as follows:

Considering the West line of said southeast quarter of Section 36, as monumented with a #6 rebar 30 inches long with a 2-½ inch aluminum cap L.S. #17662 at the center of Section and at the South quarter corner of said Section 36, as bearing North 00 degrees, 7 minutes, 33 seconds East and with all bearings contained herein relative thereto.

Beginning at said South quarter corner of Section 36; thence along said West line of the southeast quarter corner North 00 degrees, 44 minutes, 33 seconds East 1256.52 feet; thence South 89 degrees, 31 minutes, 40 seconds East 1324.53 feet to the East line of said West half of the southeast quarter of Section 36; thence along said East line South 00 degrees, 3 minutes, 29 seconds West 573.99 feet to the North line of that certain parcel of land as described at Reception No. 96035630, records of said county; thence along said North line and the West line of said parcel of land South 89 degrees, 49 minutes, 18 seconds West 175.00 feet and again South 00 degrees, 3 minutes, 30 seconds West 668.00 feet to the South line of said southeast quarter of Section 36; thence along said South line South 89 degrees, 49 minutes, 18 seconds West 457.25 feet to the North quarter corner of Section 1, Township 4 North, Range 68 West of the 6th P.M.; thence continuing along said South line South 89 degrees, 51 minutes, 49 seconds West 688.22 feet to the true point of beginning. Containing 35.247 acres more or less.

5.    Magpie Operating, Inc. (“Magpie”), mineral lessee, and the Colorado State Land Board (“SLB”), mineral owner and lessor, timely filed protests to the DOAA application. 

6.  Magpie and the SLB filed a joint motion to continue the matter, which the Commission voted to deny.  The Commission chair approved Magpie’s motion to hear testimony telephonically.

7.  The Commission heard testimony from Laura (a.k.a. Wendy) Chase who has owned the property since 1997 and invested over $1,000,000 to improve the property as a place to school horses and riders for three-day eventing (dressage, cross-county jumping, and show jumping).  She testified that normally, a three-day event takes place over properties that are much larger than Moqui Meadows; however, all three phases take place at Moqui Meadows in a relatively compressed area.  Ms. Chase testified that she has spent significant time and money on improvements to the property so that horses and riders can train without outside distractions and on soft ground with safe footing for jumping.  She testified that no vehicular traffic is allowed on the cross country course, that rocks are removed by hand, that when she drives a pick up on the course, she drags a harrow in order to improve and maintain the footing on the course.  She testified that when there is an event on the property, every part of the property is used for various activities from parking vehicles and trailers to grooming, tacking, bandaging, warming up, and cooling down horses to galloping and jumping horses on and around the cross country course.  She testified that clinics and training for three-day eventing cannot be conducted without being able to use the entire property. Ms. Chase testified that more than 20 people used the property on 45 to 50 days in 2009 and that the property is open to the public with close supervision by approved trainers.  She testified that oil and gas operations would make the property so unsafe that it could not be used for training for three-day eventing.

8.  The Commission heard testimony from Sarah Barnes, a horse trainer and competitive rider, who uses Moqui Meadows for training her students and for organizing shows and clinics for riders ranging in age from 13 to 60 years.  She testified that Eric Smiley has been flown in from Ireland and that his clinics attract 15 to 30 auditors (observers) throughout the day.  She testified that when she gives clinics, there are more than 20 people on the property and that she expects that the entire property is available and safe for the riders’ use including the areas used for parking, cross country jumping, warming up, and cooling down.  She testified that she runs clinics at Moqui Meadows because the entire property is safe. 

9.  The Commission heard testimony from Dr. Nancy Carr, DVM, an equine veterinarian and competitor, who schools horses and organizes clinics at Moqui Meadows usually involving 12 to 15 riders and an equal number of observers.  She testified that she expects to use the entire property during her clinics including the areas used for parking, cross country jumping, warming up, and cooling down.  She testified that the safety of the horses and riders depends on level footing that is not too soft or hard.  She testified that truck traffic on the property would be a safety hazard by disrupting the footing and creating noises to which the horses could overreact. 

10.  The Commission heard testimony from applicant Mike Sutak that all of the land comprising Moqui Meadows is used as an equestrian center for three-day eventing.  He also testified that in 2009, he attempted to keep track of the number of people who came to the property beginning in April.  He counted at least 20 people who used the property 43 days that year. 

11.  The Commission heard testimony from Ryan Warner, Vice President of Magpie.  He testified that Magpie has been in existence about 20 years; it has 16 employees, and two independent contractors, making it smaller than the majority of oil and gas companies in Colorado.  He testified that Magpie has 104 active wells and approximately 40 oil and gas leases. He testified that Magpie operates three wells on the lease that is common with the Moqui Meadows property in Section 36.  Mr. Warner testified that in late 2008, Magpie drilled the State Anderson 41-36 Well, located on the lease in the NE¼ NE¼ of Section 36, that the well satisfied Magpie’s expectations, that it is still producing and profitable, and that he expects wells on Moqui Meadows will be just as productive.  He testified that in May 2008, Magpie filed all its applications for permits-to-drill in Section 36 as a group.  Mr. Warner further testified that the surface use agreement with the Andersons required a fraction of the time that Magpie spent on unsuccessful negotiations with Sutak and Chase.  He testified that Magpie had been prepared to accommodate some of the surface owners’ concerns, but that ultimately the parties were unable to agree on terms of a surface use agreement.  Mr. Warner further testified that Magpie has the funding and equipment and is prepared to drill the wells on Moqui Meadows.  He also testified that he received estimates to drill wells directionally from off the property and that they ranged from a one-line estimate of $16,000 to $17,000 to a comprehensive estimate of $68,000.  He also testified that Magpie prefers to locate the tank battery along County Road 14 on Moqui Meadows property, similar to the approach it took on the Anderson property, to minimize conflict with surface use.

12.  The Commission heard rebuttal testimony from Mr. Warner about his and his family’s experience with horses.  He testified that his family’s farm has 30 horses that they train, ride, and breed on a property that has seven oil and gas wells, that they ride near the wells and the tank battery and have not had any accidents attributable to oil and gas operations. 

13.  The Commission heard testimony (telephonically) from Michael Power, President of Petroleum Power LLC, consulting petroleum engineer and employee of Delta Petroleum (senior staff drilling engineer) who has drilling experience in 11 countries and throughout the U.S.  Mr. Powers provided an estimate of incremental additional drilling costs of approximately $68,000 for a directional well with a 1,200-foot deviation from the surface to the bottomhole location. 

14.  The Commission heard testimony from Mark Davis, Minerals Director for the SLB, regarding the mineral interest that the State of Colorado received from the federal government in Section 36.  Upon statehood, the federal government granted the State of Colorado Section 36 including the entire mineral estate without reservation.  When the State sold the surface estate to Section 36, it reserved the entire mineral estate with ingress and egress to access the minerals.  Mr. Davis testified that Magpie is the lessee of Section 36, that it is in good standing, and that there are three wells on the lease, which is held by production.

15.  The Commission heard testimony and staff analysis from Steve Lindblom, Eastern Colorado Environmental Supervisor, regarding an onsite inspection on August 27, 2008.  Based on that meeting, COGCC staff requested that Magpie survey a site south of the irrigation ditch to minimize impact to the cross country course and determine whether it would be within the drilling window.  The location was outside the drilling window, and Magpie obtained a waiver from the SLB, concurring with the alternate location.  Mr. Lindblom testified that Magpie has posted a bond and is within its rights to drill in the drilling windows.  He also testified that his recommendations for well locations were subject to any Commission decision on the application for a DOAA.  He further testified that his notes from the onsite inspection in August 2008 indicated the parties talked about the tank battery possibly being on City of Johnstown property on the County Road 14 just west of Moqui Meadows property.

16.  After deliberations, the Commission voted 6 to 3 to deny the Sutak-Chase application for a DOAA based on questions regarding the definition of “designated outside activity area,” whether the property fell within the definition, whether it was the type of property or activity that was contemplated when the definition was promulgated by the Commission, and whether waste will be committed because wells cannot be located on the property if the application is granted.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the application filed by Mike Sutak and Laura W. Chase for an order to designate Moqui Meadows as an outside activity area is hereby denied. 

IT IS FURTHER ORDERED, that the provisions contained in the above order, shall become effective forthwith.

                        IT IS FURTHER ORDERED, that the Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.

                        IT IS FURTHER ORDERED, that under the State Administrative Procedure Act the Commission considers this order to be final agency action for purposes of judicial review within thirty (30) days after the date this order is mailed by the Commission.

                        IT IS FURTHER ORDERED, that an application for reconsideration by the Commission of this order is not required prior to the filing for judicial review.

                        ENTERED this 24^th day of March, 2010, as of February 22, 2010.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________         

                                                            Carol Harmon, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

March 24, 2010