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

IN THE MATTER OF THE APPLICATION OF URSA OPERATING COMPANY LLC FOR AN ORDER TO POOL ALL INTERESTS IN AN APPROXIMATE 563.1-ACRE DRILLING AND SPACING UNIT ESTABLISHED FOR SECTION 24 (SOUTH OF THE CENTER LINE OF THE COLORADO RIVER), TOWNSHIP 7 SOUTH, RANGE 96 WEST, 6^TH P.M., FOR THE WILLIAMS FORK FORMATION, PARACHUTE FIELD, GARFIELD COUNTY, COLORADO

)

CAUSE NOS. 139 & 440

DOCKET NO. 1306-UP-112

ORDER NOS. 139-117 & 440-69

CORRECTED

REPORT OF THE COMMISSION

The Commission heard this matter on July 29, 2013, at offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon application for an order to pool all interests in an approximate 563.1-acre drilling and spacing unit established for Section 24, Township 7 South, Range 96 West, 6^th P.M., to accommodate the BAT 32C-24-07-96 Well, the BAT 32B-24-07-96 Well, the BAT 12B-24-07-96 Well and the BAT 12A-24-07-96 Well, for the development and operation of the Williams Fork Formation.

FINDINGS

The Commission finds as follows:

1. Ursa Operating Company LLC (“Ursa” 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. On July 1, 1997, the Commission entered Order Nos. 139-31 and 440-18 which, among other things, approved the drilling of up to sixteen wells per 640-acre drilling and spacing unit (40-acre well density) and up to eight wells per 320-acre drilling and spacing unit, for certain lands in the Rulison and Parachute Fields, for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group. Section 24, Township 7 South, Range 96 West, 6^th P.M. is subject to these Orders for the Williams Fork Formation.

5. On April 18, 2013, Ursa, filed a verified application (“Concurrent Application”), Docket No. 1306-SP-102, for an order to establish an approximate 563.1-acre drilling and spacing unit comprised of Section 24 (South of the center line of the Colorado River), Township 7 South, Range 96 West, 6^th P.M., and approve up to 58 wells within the unit, for the production of oil, gas and associated hydrocarbons from the Williams Fork Formation.

6. On April 18, 2013, Ursa, by its attorneys, filed with the Commission pursuant to §34-60-116 C.R.S., a verified application (“Application”) for an order to pool all interests in an approximate 563.1-acre drilling and spacing unit established for the below-described lands (“Application Lands”), for the development and operation of the Williams Fork Formation, effective as of the earlier of the date of the Application, or the date that any of the costs specified in C.R.S. §34-60-116(7)(b)(II) were first incurred for the drilling of the initial well and all wells authorized to be drilled within the unit to the Williams Fork Formation, and to subject any nonconsenting interests to the cost recovery provisions of C.R.S. §34-60-116(7):

Township 7 South, Range 96 West, 6^th P.M.

Section 24: Lots 1, 5 and 6; and adjacent lands thereto, lying up to the center line of the Colorado River, NE¼NE¼; S½ NE¼; S½ (excluding Lots 2, 3 and 4, North of the center line of the Colorado River)

The proposed wells shall be located on no more than one wellpad per quarter quarter section within the drilling and spacing unit.

7. On July 16, 2013, Ursa, by its attorneys, 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.

8. Land testimony and exhibits submitted in support of the Application by Jarred McGhee, Landman for Ursa, showed that all nonconsenting interest owners were notified of the Application and received an Authority for Expenditure ("AFE") and offer to participate in the Well. Further testimony concluded that the AFE sent by the Applicant to the interest owners was a fair and reasonable estimate of the costs of the proposed drilling operation and was received at least 30 days prior to the July 29, 2013 hearing date.

9. Land testimony showed the Applicant complied with the requirements of Rule 530, and is entitled to the cost recovery provisions pursuant to §34-60-116(7), C.R.S., for the BAT 32C-24-07-96 Well (API No. 05-045-22044), the BAT 32B-24-07-96 Well (API No. 05-045-20550), the BAT 12B-24-07-96 Well (API No. 05-045-20562) and the BAT 12A-24-07-96 Well (API No. 05-045-20553) (“Wells”), but did not provide testimony for any subsequent wells.

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 hydrocarbons, and will not violate correlative rights.

11. Ursa 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 pool all interests in an approximate 563.1-acre drilling and spacing unit established for Section 24, Township 7 South, Range 96 West, 6^th P.M., to accommodate the BAT 32C-24-07-96 Well, the BAT 32B-24-07-96 Well, the BAT 12B-24-07-96 Well and the BAT 12A-24-07-96 Well, for the development and operation of the Williams Fork Formation.

ORDER

IT IS HEREBY ORDERED:

1. Pursuant to the provisions of §34-60-116, C.R.S., as amended, of the Oil and Gas Conservation Act, all interests in the approximate 563.1-acre drilling and spacing unit established for the below-described lands, are hereby pooled, for the development and operation of the Williams Fork Formation, effective as of the earlier of the date of the Application, or the date that any of the costs specified in C.R.S. §34-60-116(7)(b)(II) are first incurred for the drilling of the BAT 32C-24-07-96 Well, the BAT 32B-24-07-96 Well, the BAT 12B-24-07-96 Well and the BAT 12A-24-07-96 Well:

Township 7 South, Range 96 West, 6^th P.M.

2. The production obtained from the drilling and spacing unit shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within the drilling and spacing unit; each owner of an interest in the drilling and spacing unit shall be entitled to receive its share of the production of the Well located on the drilling and spacing unit applicable to its interest in the drilling and spacing unit.

3. The nonconsenting leased (working interest) owners must reimburse the consenting working interest owners for their share of the costs and risks of drilling and operating the Well (including penalties as provided by §34-60-116(7)(b), C.R.S.) out of production from the drilling and spacing unit representing the cost-bearing interests of the nonconsenting working interest owners as provided by §34-60-116(7)(a), C.R.S.

4. Any unleased owners are hereby deemed to have elected not to participate and shall therefore be deemed to be nonconsenting as to the Well and be subject to the penalties as provided for by §34-60-116 (7), C.R.S. Any party seeking the cost recovery provisions of §34-60-116 (7), C.R.S., shall first comply with subsection (d) for any subsequent well(s).

5. Each nonconsenting unleased owner within the drilling and spacing unit shall be treated as the owner of the landowner's royalty to the extent of 12.5% of its record title interest, whatever that interest may be, until such time as the consenting owners recover, only out of each nonconsenting owner's proportionate 87.5% share of production, the costs specified in §34-60-116(7)(b), C.R.S. as amended. After recovery of such costs, each unleased nonconsenting mineral owner shall then own its proportionate 8/8ths share of the Well, surface facilities and production, and then be liable for its proportionate share of further costs incurred in connection with the Well as if it had originally agreed to the drilling.

6. The operator of the well drilled on the above-described drilling and spacing unit shall furnish the nonconsenting owners with a monthly statement of all costs incurred, together with the quantity of oil and gas produced, and the amount of proceeds realized from the sale of production during the preceding month.

7. Nothing in this order is intended to conflict with §34-60-116, C.R.S., as amended. Any conflict that may arise shall be resolved in favor of the statute.

IT IS FURTHER ORDERED:

1. The provisions contained in the above order shall become effective immediately.

2. The Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.

3. Under the State Administrative Procedure Act the Commission considers this Order to be final agency action for purposes of judicial review within 30 days after the date this Order is mailed by the Commission.

4. An application for reconsideration by the Commission of this Order is not required prior to the filing for judicial review.

ENTERED this 27 day of August, 2013, as of July 29, 2013.

CORRECTED this 9^th day of January, 2014, as of June 17, 2013.

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By____________________________________

Robert J. Frick, Secretary