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

REPORT OF THE COMMISSION

The Commission heard this matter on April 16, 2012, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, upon application for an order to vacate the existing spacing established by Commission Order No.  188-01, Order No. 188-21, Order No. 213-01, and Order No. 213-10 for certain lands in Sections 26, 27, 28, 33 and 34, Township 18 South, Range 45 West, 6th P.M. and Sections 32 and 33, Township 18 South, Range 45 West, 6th P.M., and impose statewide setbacks consistent with Rule 318.a., for the production of oil, gas and associated hydrocarbons from the Mississippian Formation.

FINDINGS

The Commission finds as follows:

1.         Mull Drilling Company, Inc. ("Mull” 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 February 18, 1969, the Commission issued Order No. 213-01, which established 80-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Mississippian Formations, with such units consisting of the E½ and W½ of each quarter section with the permitted well located in the center of the NE¼ and SW¼ of each quarter section, with a tolerance of 150 feet in any direction to avoid surface hazards. The W½ of Section 26, Sections 27 and 28, the NE¼ of Section 33, and the NW¼ of Section 34, Township 18 South, Range 45 West, 6th P.M. are subject to Order No. 213-01.     

5.         On January 19, 1994, the Commission issued Order No. 213-10 which removed certain lands from Order No. 213-01, but confirmed that Sections 26, 27, 28, 33 and 34, Township 18 South, Range 45 West, 6th P.M. remained subject to the provisions of Order No. 213-01. The W½ of Section 26, Sections 27 and 28, the NE¼ of Section 33, and the NW¼ of Section 34, Township 18 South, Range 45 West, 6th P.M. are subject to Order No. 213-10.

6.         On October 19, 1965, the Commission issued Order No. 188-01 which, among other things, established 80-acre drilling and spacing units for the production of oil from the Mississippian Formation, each drilling unit being the W½ or E½ of each quarter section and the permitted well for each such drilling unit being located in the center of the NE¼ and SW¼ of each quarter section, with a tolerance of 150 feet in any direction. Subsequent orders issued in Cause No. 188 expanded the field and approved exceptions to permitted well locations for certain lands in Brandon Field. Sections 32 and the SE ¼ and the W ½ of Section 33, Township 18 South, Range 45 West, 6th P.M. are subject to this Order.

7.         On July 1, 1997, the Commission issued Order No. 188-20 which amended Order No. 188-1 to allow the drilling of one additional well on each 80-acre drilling and spacing unit for certain lands for production of oil and associated hydrocarbons from the Mississippian Formation, with the permitted well to be located in the center of the undrilled 40-acre tract with a tolerance of 150 feet in any direction provided that the Director be authorized to grant exceptions to well locations provided owners of the contiguous and cornering tracts toward which the exception well location is proposed to be moved file a waiver or consent in writing to said exception. None of the Application Lands were included in this Order upon its adoption.

8.         On November 25, 1997, the Commission issued Order No. 188-21 which amended Order No. 188-20 to include Section 32, and the W½ and SE¼ of Section 33, Township 18 South, Range 45 West, 6th P.M.

9.         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, unless authorized by order of the Commission upon hearing. 

10.       On February 14, 2012, Mull, by its attorneys, filed with the Commission pursuant to § 34-60-116 C.R.S., a verified application (“Application”) for an order to vacate the existing spacing established by Commission Order No.  188-01, Order No. 188-21, Order No. 213-01, and Order No. 213-10 for the below-described lands (“Application Lands”), and impose statewide setbacks consistent with Rule 318.a., for the production of oil, gas and associated hydrocarbons from the Mississippian Formation, with the treated interval of the permitted wellbore(s) to be located no closer than 600 feet from the boundaries of the proposed units, without exception being granted by the Director:

Township 18 South, Range 45 West, 6th P.M. (Calvary Field)
Section 26:    W½
Section 27:    All
Section 28:    All
Section 33:    NE¼  
Section 34:    NW¼

Township 18 South, Range 45 West, 6th P.M. (Brandon Field)
Section 32:    All
Section 33:    W½ and SE¼

Further, Applicant requested that the vacation of the existing 80-acre drilling and spacing units established by Commission Orders 188-21 and 213-10 for the Application Lands shall not affect the allocation of proceeds attributable to existing producing vertical wells.

11.       On April 3, 2012, Mull, 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.

12.       Land testimony and exhibits submitted in support of the Application by Ava Ross, Land & Contracts Director for Mull, showed Mull holds a 100% leasehold of the Application Lands, that all interested parties received proper notice, and Mull has not received any protests or objections to the Application

13.       Geologic testimony and exhibits submitted in support of the Application by Ernie Morrison, Geologist for Mull, including an analysis of cross-sections from the Brandon and Cavalry Fields, demonstrate the Mississippian Formation underlies the Application Lands.

14.       Engineering testimony and exhibits submitted in support of the Application by Mark Shreve, President / CEO of Mull, concluded that based on type wells producing from the Mississippian Formation in the Application Lands, 80-acre spacing is not required for production from the Mississippian Formation.  Calculations showed the highest producing well only drained 40.3-acres.  Testimony concluded that setbacks consistent with Rule 318.a. are appropriate for the Application Lands.

15.       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.

16.       Mull agreed to be bound by oral order of the Commission. 

17.       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 vacate the existing spacing established by Commission Order No.  188-01, Order No. 188-21, Order No. 213-01, and Order No. 213-10 for certain lands in Sections 26, 27, 28, 33 and 34, Township 18 South, Range 45 West, 6th P.M. and Sections 32 and 33, Township 18 South, Range 45 West, 6th P.M., and impose statewide setbacks consistent with Rule 318.a., for the production of oil, gas and associated hydrocarbons from the Mississippian Formation.

ORDER

NOW, THEREFORE IT IS ORDERED, that the existing spacing established by Commission Order No.  188-01, Order No. 188-21, Order No. 213-01, and Order No. 213-10, is hereby vacated, for the below-described lands (“Application Lands”), and statewide setbacks consistent with Rule 318.a., are hereby established, for the production of oil, gas and associated hydrocarbons from the Mississippian Formation, with the treated interval of the permitted wellbore(s) to be located no closer than 600 feet from the boundaries of the proposed units, without exception being granted by the Director:

Township 18 South, Range 45 West, 6th P.M. (Calvary Field)
Section 26:    W½
Section 27:    All
Section 28:    All
Section 33:    NE¼  
Section 34:    NW¼

Township 18 South, Range 45 West, 6th P.M. (Brandon Field)
Section 32:    All
Section 33:    W½ and SE¼

IT IS FURTHER ORDERED, that vacating the existing 80-acre drilling and spacing units established by Commission Orders 188-21 and 213-10 for the Application Lands shall not affect the allocation of proceeds attributable to existing producing vertical wells.

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

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 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   18th  day of April, 2012, as of April 16, 2012.
           
                                                                        OIL AND GAS CONSERVATION COMMISSION
                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________         
                                                                                    Peter J. Gowen, Acting Secretary

Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
April 18, 2012