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 on November 30, 2009, at 9:00 a.m., in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to designate two 160-acre drilling and spacing units for certain lands located in Section 10, Township 2 North, Range 66 West, 6^th P.M., for the production of oil and associated hydrocarbons from the Codell and Niobrara Formations, and to pool all nonconsenting interests in said units, for the development and operation of the Codell and Niobrara Formations.

FINDINGS

                        The Commission finds as follows:

                        1.  INB Land & Cattle, LLC (“INB”), 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.

4.     On February 16, 1971, the Commission issued Order No. 232-2, which among other things, established 320-acre drilling and spacing units for certain lands, including the W½ of Section 10, Township 2 North, Range 66 West, 6^th P.M., for the production of gas and associated hydrocarbons from the “J” Sand Formation, with the permitted well to be located in the NE¼ and SW¼ of each section and no closer than 990 feet to the boundaries of the quarter section upon which it is located.  On February 14, 1974, the Robert L. McPeek Unit #1 Well (API No. 05-123-07986) was completed, at a location 1610 feet FSL and 1610 feet FWL in said Section 10, for the production of gas and associated hydrocarbons from the “J” Sand Formation.

5.     On August 21, 1979, the Commission issued Order No. 232-20, which among other things, approved an additional second well for each established 320-acre drilling and spacing unit for certain lands, including the W½ of Section 10, Township 2 North, Range 66 West, 6^th P.M., for the production of gas and associated hydrocarbons from the “J” Sand Formation, with the permitted well to be located in the undrilled quarter section of the unit and no closer than 990 feet to the boundaries of the quarter section upon which it is located.  On August 8, 1982, the Robert L. McPeek Unit #3 Well (API No. 05-123-10485) was completed, at a location 1440 feet FNL and 1525 feet FWL in said Section 10, for the production of gas and associated hydrocarbons from the “J” Sand Formation.

6.     On April 16, 1991 (corrected May 17, 1991), the Commission issued Order Nos. 232-47 and 407-66, which among other things, approved of commingled production, through completion or recompletion, for certain lands, including Section 10, Township 2 North, Range 66 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Codell, Niobrara and “J” Sand Formations, with the location of any wellbore completed or recompleted in the Codell or Niobrara Formation to be no closer than 920 feet from any existing or permitted well either capable of producing from, or scheduled to be produced from, the Codell or Niobrara Formation.  In June 1997, the McPeek #1 Well was recompleted for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations, to be commingled with the “J” Sand Formation.  In April 1998, the McPeek #3 Well was recompleted for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations, to be commingled with the “J” Sand Formation.

7.     On April 27, 1998, the Commission adopted Rule 318A., which among other things, allowed certain drilling locations to be utilized to drill or twin a well, deepen a well or recomplete a well and to commingle any or all of the Cretaceous Age Formations from the base of the Dakota Formation to the surface.  On December 5, 2005, Rule 318A. was amended to, among other things, allow interior infill and boundary wells to be drilled and wellbore spacing units to be established.  Section 10, Township 2 North, Range 66 West, 6^th P.M., is subject to this Rule for the Codell, Niobrara and “J” Sand Formations.

8.     On April 27, 2009, INB, by its representative, Robert L. McPeek, filed with the Commission an application for an order to designate two approximate 160-acre drilling and spacing units for the below-listed lands (to accommodate the below-listed wells), for the production of oil and associated hydrocarbons from the Codell and Niobrara Formations, and to pool all nonconsenting interests in the previously designated 160-acre drilling and spacing units, for the development and operation of the Codell and Niobrara Formations:

Township 2 North, Range 66 West, 6^th P.M.

Robert L. McPeek Unit #1 Well

Robert L. McPeek Unit #3 Well

9.     On June 2, 2009, Anadarko Petroleum Corporation, by its attorneys, filed a written protest to the application.  On June 30, 2009, the hearings officer conducted a prehearing conference in this matter, and parties agreed to set the matter over for hearing on the November 2009 Commission docket.

10.   On November 18, 2009, a second prehearing conference was convened in this matter, and during the course of that conference, the Hearings Officer, by Order on Prehearing Conference, entered his recommendation/orders granting Anadarko’s Motion for Summary Judgment and deny INB’s application, based on findings that there is no genuine issue of material fact and that Anadarko is entitled to judgment as a matter of law, in that, INB is not a “nonconsenting owner” of those mineral interests comprising the drilling and spacing units established for the McPeek #1 and McPeek #3 wells, completed and producing from the Codell, Niobrara, and “J” Sand Formations, and, therefore, INB is not entitled to involuntarily pool those interests.

11.   On November 30, 2009, following argument by INB and Anadarko, the Commission voted to approve the recommendation of the Hearings Officer contained in the Order on Prehearing Conference and, consequently, denied INB’s application.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the application filed by INB Land & Cattle, LLC, for an order to designate two 160-acre drilling and spacing units for the SW¼ and NW¼ of Section 10, Township 2 North, Range 66 West, 6^th P.M., for the production of oil and associated hydrocarbons from the Codell and Niobrara Formations, and to pool all nonconsenting interests in said units, for the development and operation of the Codell and Niobrara Formations, is hereby denied.

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 7^th day of December, 2009, as of November 30, 2009.

CORRECTED this ________ day of February, 2010, as of December 7, 2009.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________       

                                                            Carol Harmon, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

February 1, 2010