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 at 9:00 a.m. on August 12, 2010, in the Adams County Economic Development Offices, 12050 N. Pecos St., Suite 200, Westminster, Colorado, for an order to pool all nonconsenting interests in the four designated approximate 80-acre standup drilling and spacing units consisting of the W½ SW¼, E½ SW¼, W½ SE¼, E½ SE¼ of Section 6, Township 5 North, Range 62 West, 6th P.M., for the development and operation of the Codell and Niobrara Formations.   

FINDINGS

The Commission finds as follows:

1.    Noble Energy, Inc. (“Noble”), 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 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.  Further, Rule 318A.a.(4)C. provides that when completing a Greater Wattenberg Area (“GWA”) well to an unspaced formation, the operator shall designate a drilling and spacing unit not smaller than a governmental quarter-quarter section if such well is proposed to be located greater than 460 feet from the quarter-quarter section boundary in which it is located.  Section 6, Township 5 North, Range 62 West, 6^th P.M. is subject to these Rules for the Codell and Niobrara Formations. 

                        5.  On March 17, 2010, Noble, by its attorneys, filed with the Commission a verified application to pool all nonconsenting owners in the 80-acre drilling and spacing units designated for the below-listed lands, for the development and operation of the Codell and Niobrara Formations from the following wells and any future wells that may be drilled in said units:

Drilling and Spacing Unit A

Township 5 North, Range 62 West, 6^th P.M.

Wells Ranch AF #06-12, with a planned bottomhole location 1,968 feet FSL and 544 feet FWL of Section 6;

Wells Ranch AF #06-13, with a planned bottomhole location 633 feet FSL and 785 feet FWL of Section 6.

Drilling and Spacing Unit B

Township 5 North, Range 62 West, 6^th P.M.

Wells Ranch AF #06-11, with a planned bottomhole location 2,010 feet FSL and 1,941 feet FWL of Section 6;

Wells Ranch AF #06-14, with a planned bottomhole location 582 feet FSL and 1,994 feet FWL of Section 6.

Drilling and Spacing Unit C

Township 5 North, Range 62 West, 6^th P.M.

Wells Ranch AF #06-10, with a planned bottomhole location 1,990 feet FSL and 2,034 feet FEL of Section 6;

Wells Ranch AF #06-15, with a planned bottomhole location 641 feet FSL and 2,027 feet FEL of Section 6.

Drilling and Spacing Unit D

Township 5 North, Range 62 West, 6^th P.M.

Wells Ranch AF #06-09, with a planned bottomhole location 1,880 feet FSL and 507 feet FEL of Section 6;

Wells Ranch AF #06-16, with a planned bottomhole location 604 feet FSL and 685 feet FEL of Section 6.

Further, Noble requests that this order be retroactive to the spud date of each well.

6.  On June 23, 2010, Noble, by its attorneys, filed with the Commission a verified amended application to allow for additional time to notify interested parties.

7.  On July 30, 2010, Margaret E. (Flynn) Calder, Donald C. Flynn, and Patrick H. Flynn by their attorney, filed a protest to the application.  On August 6, 2010 the protest was withdrawn.

8.  On August 6, 2010, Noble, 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 as is provided for by Rule 511.  Sworn written testimony and exhibits were submitted in support of the application.

9.  Testimony and exhibits submitted in support of the application indicate that all mineral estate owners have leased and/or voluntarily pooled their interests in each of the Drilling Units, with the exception of the Estate of Bernal B. Madison, deceased, for which no valid legal representative exists.  Margaret E. (Flynn) Calder, Donald C. Flynn, and Patrick H. Flynn are the putative heirs of the Estate of Bernal B. Madison, deceased. 

10.  Testimony and exhibits submitted in support of the application showed that offers to participate and offers to lease were sent to the putative heirs of the sole non-consenting mineral estate owner, the Estate of Bernal B. Madison, deceased. 

11.  Testimony and exhibits submitted showed that the offers were fair and reasonable, and similar to those prevailing in the area.  Further testimony submitted showed the offers were sent via mail, and all were received at least thirty (30) days prior to the August 12, 2010 hearing date.

12. A protest to the application was filed, and subsequently withdrawn, by the putative heirs of the sole non-consenting mineral estate owner, the Estate of Bernal B. Madison, deceased.

13.  The testimony and exhibits submitted indicated that Noble has complied with the requirements of C.R.S. § 34-60-116 and Commission Rule 530(b)(c).

14.  Noble agreed to be bound by oral order of the Commission. 

                        15.  Based on the facts stated in the verified application, having received one protest which was withdrawn, and based on the Hearing Officer review of the application under Rule 511., the Commission should enter an order to pool all nonconsenting interests in the four designated approximate 80-acre standup drilling and spacing units consisting of the W½ SW¼, E½ SW¼, W½ SE¼, E½ SE¼ of Section 6, Township 5 North, Range 62 West, 6th P.M., for the development and operation of the Codell and Niobrara Formations.   

ORDER

NOW, THEREFORE IT IS ORDERED, that

1.         Pursuant to the provisions of §34-60-116, C.R.S., as amended, of the Oil and Gas Conservation Act, the nonconsenting interests in the designated approximate 80-acre drilling and spacing units for the below-listed lands, are hereby pooled, for the development and operation of the Codell and Niobrara Formations from the following wells and any future wells that may be drilled in said units, and effective as of the spud date of each well:

Drilling and Spacing Unit A

Township 5 North, Range 62 West, 6^th P.M.

Wells Ranch AF #06-12, with a planned bottomhole location 1,968 feet FSL and 544 feet FWL of Section 6;

Wells Ranch AF #06-13, with a planned bottomhole location 633 feet FSL and 785 feet FWL of Section 6.

Drilling and Spacing Unit B

Township 5 North, Range 62 West, 6^th P.M.

Wells Ranch AF #06-11, with a planned bottomhole location 2,010 feet FSL and 1,941 feet FWL of Section 6;

Wells Ranch AF #06-14, with a planned bottomhole location 582 feet FSL and 1,994 feet FWL of Section 6.

Drilling and Spacing Unit C

Township 5 North, Range 62 West, 6^th P.M.

Wells Ranch AF #06-10, with a planned bottomhole location 1,990 feet FSL and 2,034 feet FEL of Section 6;

Wells Ranch AF #06-15, with a planned bottomhole location 641 feet FSL and 2,027 feet FEL of Section 6.

Drilling and Spacing Unit D

Township 5 North, Range 62 West, 6^th P.M.

Wells Ranch AF #06-09, with a planned bottomhole location 1,880 feet FSL and 507 feet FEL of Section 6;

Wells Ranch AF #06-16, with a planned bottomhole location 604 feet FSL and 685 feet FEL of Section 6.

2.  The production obtained from the drilling and spacing units shall be allocated to each owner in the respective 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 applicable unit; each owner of an interest in the respective drilling and spacing unit shall be entitled to receive its share of the production of the wells located on the unit applicable to its interest in such 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 wells (including penalties as provided by §34-60-116 (7)(b), C.R.S.) out of production from the applicable unit representing the cost-bearing interests of the nonconsenting working interest owners as provided by §34-60-116(7)(a), C.R.S.

4.     The unleased owners are hereby deemed to have elected not to participate and shall therefore be deemed to be nonconsenting as to the wells (as described hereinabove) together with future wells drilled to the Codell and Niobrara Formations in the 80-acre drilling and spacing units and be subject to the penalties as provided for by §34-60-116 (7), C.R.S.

5.     Each nonconsenting unleased owner within the drilling and spacing units 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 wells, surface facilities and production, and then be liable for its proportionate share of further costs incurred in connection with the wells as if it had originally agreed to the drilling.

6.     The operator of the wells drilled on the above-described drilling and spacing units 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, 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 September, 2010, as of August 12, 2010.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________         

                                                                                    Carol Harmon, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

September 8, 2010