139-124

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 FOR THE WILLIAMS FORK AND ILES FORMATION, VEGA FIELD, GARFIELD COUNTY, COLORADO

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CAUSE NO. 139

DOCKET NO. 160300124

TYPE: SPACING

ORDER NO. 139-124

REPORT OF THE COMMISSION

The Commission heard this matter on October 24, 2016, at the Northeastern Junior College, Hayes Student Center Ballroom, 100 College Avenue, Sterling, Colorado, upon an application for an order to amend Order No. 139-119 to describe the three drilling and spacing units established for Section 24, Township 7 South, Range 96 West, 6^th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.

FINDINGS

The Commission finds as follows:

1. Caerus Piceance LLC (“Caerus” or “Applicant”), Operator #10456, 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 herein, 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 No. 139-31 which, among other things, authorized the drilling of 16 wells for Section 24, Township 7 South, Range 96 West, 6^th P.M., for the production of gas and associated hydrocarbons from the Williams Fork Formation.

5. On June 17, 2013 (corrected April 15, 2014), the Commission entered Order No. 139-116 which, among other things, established an approximate 563.1-acre drilling and spacing unit for the below-described lands, with authority to drill 10-acre well density (for up to 56 wells) within the unit, for the production of gas and associated hydrocarbons from the Williams Fork Formation:

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 centerline of the Colorado River, NE¼ NE¼; S½ NE¼; S½ (excluding Lots 2, 3 and 4, North of the centerline of the Colorado River)

6. On October 28, 2013 (corrected January 9, 2014), the Commission entered Order No. 510-64 which, among other things, established an approximate 76.9-acre drilling and spacing unit for the below-described lands, with authority to drill 10-acre well density (for up to 7 wells) within the unit, for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations:

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

Section 24: Lots 2, 3 and 4, North of the centerline of the Colorado River

7. On June 17, 2014, the Commission entered Order 139-119 which, among other things, established one approximate 560-acre drilling and spacing unit, one approximate 70-acre drilling and spacing unit and one approximate 10-acre drilling and spacing unit for the below-described lands with 10-acre bottomhole density within the units, for the production of oil, gas and associated hydrocarbons from the Williams Fork and Iles Formations, without exception being granted by the Director.

DSU #1 – approximately 560 acres

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

Section 24: Lots 1, 5 and 6; , lying up to the center line of the Colorado River, NE¼ NE¼; S½ NE¼; S½ (excluding Lots 2, 3 and 4, North of the centerline of the Colorado River; and DSU #3 described below)

DSU #2 – approximately 70 acres

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

Section 24: Lots 2, 3 and 4, North of the centerline of the Colorado River (excluding S½S½ NW¼NW¼ which is DSU #3).

DSU #3 – approximately 10 acres

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

Section 24: S½ S½ NW¼ NW¼

8. On January 7, 2016 (amended June 17, 2016), Caerus filed a verified application pursuant to §34-60-116, C.R.S., for an order to amend Order No. 139-119 to: 1) describe three drilling and spacing units with the legal descriptions for the below-described lands (“Application Lands”), for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations:

Amended DSU #1 – approximately 560 acres

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

Section 24:

Lots 1, 5 and 6; and adjacent lands thereto South of the centerline of the Colorado River, NE¼ NE¼; S½ NE¼; S½ (excluding Lots 2, 3 and 4, North of the centerline of the Colorado River; and DSU #3 described below)

Amended DSU #2 – approximately 70 acres

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

Section 24:

Lots 2, 3 and 4, North of the centerline of the Colorado River (excluding DSU#3 described below)

Amended DSU #3 – approximately 10 acres (6.9 acres North of the centerline of the Colorado River and 3.1 acres South of the centerline of the Colorado River)

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

Section 24: That portion of the following described parcel of land lying in the NW¼ as follows:

Beginning at a point 856.2216 feet South along the shared NE line of Section 23, Township 7 South, Range 96 West, 6^th P.M., and the NW line of Section 24, Township 7 South, Range 96 West, 6^th P.M., bears South 87º17’28.7268226” East a distance of 1,124.01; Thence North 85º45’57.44105257” East a distance of 388.48 feet;

Thence South 76º39’4.582412328” East a distance of 183.51 feet;

Thence South 33º41’24.2431211” West a distance of 185.5 feet;

Thence South 31º36’27.00807778” West a distance of 184.78 feet;

Thence North 81º25’3.910899951” West a distance of 427.14 feet;

Thence South 5º31’9.998135416” West a distance of 209.65 feet;

Thence North 88º37’53.53871022” West a distance of 459.89 feet;

Thence North 3º26’9.640564308” West a distance of 346.42 feet;

Thence North 75º40’15.81719642” West a distance of 574.73 feet;

Thence North 20º33’21.76286006” West a distance of 25.86 feet, more or less, to the point of beginning

9. On February 22, 2016, Ursa Operating Co. LLC (“Ursa”) filed its Protest to the Application. On June 16, 2016, Ursa filed a Conditional Withdrawal of its Protest on the condition that Caerus amend the Application to remove all references to a stipulation between Caerus and Ursa and to remove all requests for statutory pooling and/or declaration of parties respective ownership interests.

10. On June 17, 2016, Caerus, by its attorneys, filed an amended verified application (“Application”) which withdrew the request to pool all interests within the approximate 10-acre drilling and spacing unit established for Amended DSU #3, for the development and operation of the Williams Fork and Iles Formations.

11. On June 17, 2106, Ursa withdrew its protest.

12. On August 8, 2016, Caerus, 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.

13. Land testimony and exhibits presented in support of the Application by Aubree Besant, Rockies Lead Landman for Caerus, showed Caerus owns substantial leasehold interests underlying the Application Lands. Testimony also showed Caerus has drilled, and presently operates, the only well permitted by Order No. 139-119 for the 10-acre drilling and spacing unit, namely, the Island Ranch 11D-24 well (API No. 05-045-22437). Due to the complexities associated with making legal description of the 10-acre drilling and spacing unit, and the contribution of those lands North and South of the centerline of the Colorado River comprising this unit, Caerus has brought the Application to clearly and accurately describe the three drilling

and spacing units for the Application Lands, for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.

14. 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.

15. Caerus agrees to be bound by the oral order of the Commission.

16. Based on the facts stated in the verified Application, having received one protest which was subsequently withdrawn, and based on the Hearing Officer review of the Application under Rule 511., the Commission should enter an order amending Order No. 139-119 to describe the three drilling and spacing units established for Section 24, Township 7 South, Range 96 West, 6^th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.

ORDER

IT IS HEREBY ORDERED:

1. Order No. 139-119 is hereby amended to describe the three drilling and spacing units established for the below-described lands (“Application Lands”), for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations:

Amended DSU #1 – approximately 560 acres

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

Section 24:

Lots 1, 5 and 6; and adjacent lands thereto South of the centerline of the Colorado River, NE¼ NE¼; S½ NE¼; S½ (excluding Lots 2, 3 and 4, and adjacent lands thereto North of the centerline of the Colorado River; and DSU #3 described below)

Amended DSU #2 – approximately 70 acres

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

Section 24:

Lots 2, 3 and 4 and adjacent lands thereto North of the centerline of the Colorado River) (excluding DSU#3 described below)