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 October 21, 2010, West Garfield Campus, Colorado Mountain College, 3695 Airport Road, Rifle, Colorado, for an order to amend Order No. 407-374 by establishing and including in the order an approximate 640-acre drilling and spacing unit consisting of Section 14, Township 6 North, Range 61 West, 6th P.M., for the production of oil and gas and associated hydrocarbons from the Niobrara Formation, and allow up to two optional horizontal wells in such unit, with the initial penetration lateral leg and bottomhole location not closer than 460 feet from the boundaries of the unit.

FINDINGS

                        The Commission finds as follows:

                        1.         Petroleum Development Corporation, (“PDC” 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.         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.  Section 14, Township 6 North, Range 61 West, 6^th P.M. is subject to this Rule for the Niobrara Formation.

5.         Rule 318A.a.(4)C. provides that when completing a Greater Wattenberg Area (“GWA”) well in an unspaced formation, the operator shall designate a drilling and spacing unit not smaller than a governmental quarter-quarter section if the well is to be located no closer than 460 feet to the quarter-quarter section boundary in which it is located.  The below-listed lands are within the GWA and are subject to Rule 318A.a.(4)C. for the Niobrara Formation:

Township 6 North, Range 61 West, 6^th P.M.

6.         On July 8, 2010, the Commission issued Order No. 407-374, which established eleven (11) approximate 640-acre drilling and spacing units for the below-listed lands for the production of oil and gas and associated hydrocarbons from the Niobrara Formation, and approved the drilling of up to two optional horizontal wells for each unit, with a bottomhole location and the horizontal leg of any permitted well to be no closer than 460 feet from the boundaries of the unit:

Township 6 North, Range 60 West, 6^th P.M.

Township 6 North, Range 61 West, 6^th P.M.

Township 7 North, Range 61 West, 6^th P.M.

7.         On September 1, 2010, PDC, through its attorney, filed with the Commission a verified application to amend Order No. 407-374 to add the below-listed lands (“Application Lands,” which are immediately south of and contiguous to lands included in Order No. 407-374)  as a 640-acre drilling and spacing unit for the production of oil and gas and associated hydrocarbons from the Niobrara Formation, and allow up to two optional horizontal wells in such unit, with an initial formation penetration, lateral leg, and bottomhole location of any permitted well to be no closer than 460 feet from the boundaries of the unit:

Township 6 North, Range 61 West, 6^th P.M.

Weld County, Colorado

                        8.         Applicant agrees that said wells, absent an exception location request approved by the Director, shall be drilled from a surface location within any of the GWA windows designated by Rule 318A.a.(1) and (2).

                        9.         The Commission takes administrative notice of the findings contained in Order No. 407-374, said findings being equally applicable to the Application Lands, which consist of one approximately 640 acre section of land, contiguous to and immediately south of Section 11, Township 6 North, Range 61 West, 6th P.M., to wit:

                                    A.  The Niobrara Formation is a common source of supply underlying the Application Lands, and in order to promote efficient drainage of said formation, to prevent waste, and to protect correlative rights, the Commission should establish approximate 640-acre drilling and spacing units as requested by Applicant, and allow up to two (2) horizontal wells in each of said units, with the second well at the option of Applicant.

                                    B.  Drilling and spacing units of the specified size and configuration are not smaller than the maximum area that can be economically and efficiently drained by the proposed well(s).

                                    C.  The size and configuration of the proposed drilling and spacing units, and the proposed surface locations of the well(s) are consistent with GWA Rule 318A.

                        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 gas, and will not violate correlative rights.

                        11.       PDC 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 amending Order No. 407-374 by adding a single, contiguous section of land to the area spaced by said Order, thereby establishing an approximate 640-acre drilling and spacing unit for the drilling of up to two (2) horizontal wells into the Niobrara Formation on the Application Lands.

ORDER

NOW, THEREFORE IT IS ORDERED, that Order No. 407-374 is hereby amended by adding a single, contiguous section of land to the area spaced by said order, thereby establishing an approximate 640 acre drilling and spacing unit for the drilling of up to two (2) horizontal wells into the Niobrara Formation on the following lands:

                                    Township 6 North, Range 61 West, 6^th P.M  

                                    Section 14:  All

                                    Weld County, Colorado

IT IS FURTHER ORDERED, that the provisions contained in Order No. 407-374, as amended, shall be effective forthwith and shall apply to all future operations to develop the  Niobrara Formation within the specified drilling and spacing unit.

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 November 2010, as of October 21, 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

November 22, 2010