BEFORE THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO
IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE IGNACIO-BLANCO FIELD, LA PLATA COUNTY, COLORADO	) ) ) )	CAUSE NO.   112 ORDER NO.   112-198

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 9:00 a.m. on January 8, 2007, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to allow a sidetrack operation from an existing Fruitland coal seam well to allow two (2) horizontal legs to be drilled in an existing 320-acre drilling and spacing unit consisting of the N½ of Section 15, Township 34 North, Range 8 West, N.M.P.M.

FINDINGS

                        The Commission finds as follows:

                        1.  BP America Production Company ("BP"), 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. On June 17, 1988, the Commission issued Order No. 112-60, which among other things, established 320-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Fruitland coal seams including Section 15, Township 34 North, Range 8 West, N.M.P.M., with the units consisting of the N½ and S½ or the E½ and W½ of a full section with the permitted well located, when north of the north line of Township 32 North, in the NW¼ and SE¼ of the section, and when south of the north line of Township 32 North, in the NE¼ and SW¼ of the section, and no closer than 990 feet to any outer boundary of the unit, or closer than 130 feet to any interior quarter section line.

5.  On July 11, 2000, the Commission issued Order No. 112-156, which among other things, amended Order Nos. 112-60, 112-61 and 112-85 to allow an optional additional well to be drilled for production of gas from the Fruitland coal seams for certain lands, including Section 15, Township 34 North, Range 8 West, N.M.P.M. 

6.  On November 20, 2006, BP, by its attorney, filed with the Commission a verified application for an order to allow a sidetrack operation of an existing well to allow two (2) horizontal legs to be drilled in the 320-acre drilling and spacing unit consisting of the N½ of Section 15, Township 34 North, Range 8 West, N.M.P.M.  The Annala Federal GU A #1 Well, a vertical well, currently exists in the N½ 320-acre unit and is located 1012.7 feet from the north line and 2451.5 feet from the west line in the NW¼ of Section 15, Township 34 North, Range 8 West.  BP proposes to drill two (2) horizontal sidetracks from the Annala Federal GU A #1 Well generally toward the northwest corner of said drilling and spacing unit with proposed bottomhole location(s) in the NW¼ of Section 15, no closer than 660 feet from the outer boundaries of Section 15, with no interior line setback.  BP requested the right to produce from the two (2) existing vertical wells in the drilling and spacing unit and from both horizontal sidetrack wellbores located in the 320-acre drilling and spacing unit.  All owners in the 320-acre drilling and spacing unit are common and no violation of correlative rights exists by allowing the sidetrack operation wells to be produced from the NW¼ of Section 15.

7.  On December 19, 2006, BP, 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 five (5) exhibits were submitted in support of the application.

8.  Testimony and exhibits submitted in support of the application showed that in order to minimize surface disturbance the sidetrack operation of the Annala Federal GU A #1 Well will be conducted from the existing wellpad, allowing the operation to be developed in a manner consistent with protection of public health, safety and welfare.

9.  Testimony and exhibits submitted in support of the application and from prior hearings of which the Commission takes administrative notice, showed that coals in the Fruitland Formation are present throughout the application area, that the Fruitland coals exhibit highly variable reservoir properties both vertically and laterally because of barriers to vertical and lateral flow, and that additional laterals are needed to adequately drain the gas contained in two targeted coal seams in this reservoir.

10.  Testimony and exhibits submitted in support of the application showed that the sidetrack operation improves recovery efficiency, will recover additional reserves, and that the operation will be economic.

11.  Testimony and exhibits submitted in support of the application showed that in order to effectively place the sidetracks from the existing wellbore, that the drilling window setbacks should be reduced to six hundred sixty (660) feet from the spacing unit boundary and that due to uniformity ownership, the one hundred thirty (130) feet interior section line setback is not necessary and that correlative rights are adequately protected.

12.  BP America Production Company agreed to be bound by oral order of the Commission.

13.  Based on the facts stated in the verified application, having received no protests and having been reviewed by the Hearing Officer under Rule 511.b., the Commission should enter an order to allow two (2) horizontal sidetracks from the Annala Federal GU A #1 Well to be drilled in the existing 320-acre drilling and spacing unit toward the northwest corner of the drilling and spacing unit in the N½ of Section 15, Township 34 North, Range 8 West, N.M.P.M., for production from the Fruitland coal seams.

ORDER

NOW, THEREFORE IT IS ORDERED, that two (2) horizontal sidetracks from the Annala Federal GU A #1 Well located in the N½ of Section 15, Township 34 North, Range 8 West, N.M.P.M. are hereby approved for production of gas from the Fruitland coal seams, with the permitted sidetracks to be located no closer than six hundred sixty (660) feet from the unit boundary, with no interior section line setback.

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 January, 2007, as of January 8, 2007.

                                                                        OIL AND GAS CONSERVATION COMMISSION

   OF THE STATE OF COLORADO

By____________________________________

            Patricia C. Beaver, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

January 18, 2007