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 at 9:00 a.m. on October 21, 2010, West Garfield Campus, Colorado Mountain College, 3695 Airport Road, Rifle, Colorado, for an order to establish an approximate 1,280-acre drilling and spacing unit consisting of Sections 4 and 9, Township 9 North, Range 61 West, 6th P.M., for the drilling of one exploratory horizontal well, with the lateral within the Niobrara Formation not closer than 600 feet from the unit boundaries and not closer than 300 feet from any other wellbore that has penetrated the Niobrara Formation.

FINDINGS

The Commission finds as follows:

1.  Continental Resources, Inc. (“Continental” or “Applicant”), as applicant herein, is an interested party 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 pursuant to the Oil and Gas Conservation Act.

4.  Rule 318.a. of the Rules and Regulations of the Oil and Gas Conservation Commission requires that wells drilled in excess of 2,500 feet in depth be located not less than 600 feet from any lease line, and located not less than 1,200 feet from any other producible or drilling oil or gas well when drilling to the same common source of supply.  Sections 4 and 9 in Township 9 North, Range 61 West 6^th P.M., are subject to this Rule.

5.  On September 1, 2010, Continental, by its attorney, filed with the Commission a verified application to establish an approximate 1,280-acre drilling and spacing unit consisting of the below-listed lands (“Application Lands”) for the drilling of a horizontal well in the Niobrara Formation:

Township 9 North, Range 61 West, 6th P.M.

Sections 4 and 9:        All

Weld County, Colorado

Applicant proposes that the following setback rules would apply to the horizontal well drilled into the Niobrara Formation:

That the surface location may be located anywhere on the Application Lands;

That the lateral within the Niobrara Formation shall not be closer than 600 feet from any section line of the Application Lands; and

That the lateral within the Niobrara Formation shall be located not closer than 300 feet from any other wellbore on the Application Lands that has penetrated the Niobrara Formation.

                        6.  On October 7, 2010, Continental, by its attorney, filed with the Commission a written request to approve the application based on the merits of the verified application and the supporting exhibits.  Sworn written testimony and exhibits were submitted in support of the application.

                        7.  Land testimony and exhibits submitted in support of the application indicated that Continental owns a leasehold interest in the requested drilling and spacing unit. 

                        8.  Geological testimony and exhibits submitted in support of the application indicated that the Niobrara Formation is made up of shale, marl, limestone and chalk benches deposited during Cretaceous time.  Further testimony indicated deposition of the Niobrara Formation is widespread because of the vast nature of the seaway in which it was deposited and that it underlies the Application Lands. 

                        9.  Engineering testimony and exhibits submitted in support of the application indicated that, based upon drainage characteristics in one horizontal well in Weld County and horizontal wells drilled in the Silo Field in Wyoming, the largest expected drainage area for one horizontal well drilled within a 640 acre drilling unit would be approximately 270 acres.  Further testimony indicated that with a longer lateral within a 1,280 acre drilling and spacing unit, the drainage area would be proportionately greater.  Further engineering testimony and exhibits indicated that with the depth of the Niobrara Formation in the Application Lands, the drilling of a horizontal well on 1,280-acre spacing (with a lateral leg approximately 9,000 feet long) should provide better economics than drilling on 640-acre spacing (with a lateral leg approximately 5,000 feet long).

10.  The above-referenced testimony and exhibits show that granting the application will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas, and will not violate correlative rights.

11.  Continental agreed to be bound by oral order of the Commission. 

12.  Based on the facts stated in the verified application, having received no protests, and based on the Hearing Officer review of the application under Rule 511., the Commission should enter an order to establish an approximate 1,280-acre drilling and spacing unit consisting of Sections 4 and 9, Township 9 North, Range 61 West, 6th P.M., for the drilling of one exploratory horizontal well, with the lateral within the Niobrara Formation not closer than 600 feet from the unit boundaries and not closer than 300 feet from any other wellbore that has penetrated the Niobrara Formation.

ORDER

NOW, THEREFORE IT IS ORDERED, that an approximate 1,280-acre drilling and spacing unit, is hereby established, consisting of the below-listed land, for the drilling of exploratory horizontal wells in the Niobrara Formation:

Township 9 North, Range 61 West, 6th P.M.

Sections 4 and 9:        All

Weld County, Colorado

IT IS FURTHER ORDERED, that the following setback rules would apply to the horizontal wells drilled into the Niobrara Formation:

That the surface location may be located anywhere on the Application Lands;

That the lateral within the Niobrara Formation shall not be closer than 600 feet from any section line of the Application Lands; and

That the lateral within the Niobrara Formation shall be located not closer than 300 feet from any other wellbore on the Application Lands that has penetrated the Niobrara Formation.

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__________ day of November 2010, as of October 21, 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

November 22, 2010