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

REPORT OF THE COMMISSION

The Commission heard this matter on January 23, 2012, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, upon application for an order authorizing a surface location exception from Rule 318A.a. for a proposed horizontal well, namely the Greasewood #15-30H Well, to be drilled from a surface location of 501 feet FSL and 2,639 feet FWL in the SE¼ SW¼ of Section 30, Township 6 North, Range 61 West, 6^th P.M. for the production of oil, gas, and related hydrocarbons of the Niobrara Formation.

FINDINGS

The Commission finds as follows:

1.     EOG Resources, Inc. (“EOG” 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 April 27, 1998, the Commission adopted Rule 318A.a., which among other things, designated the following surface drilling locations for wells drilled in the Greater Wattenberg Area (“GWA”) windows, including Section 30, Township 6 North, Range 61 West, 6^th P.M.:

(1)    A square with sides four hundred (400) feet in length, the center of which is the center of any governmental quarter-quarter section (“400’ window”); and

(2)    A square with sides eight hundred (800) feet in length, the center of which is the center of any governmental quarter section (“800’ window”).

(3)   Absent a showing of good cause, which shall include the existence of a surface use or other agreement with the surface owner authorizing a surface well location outside of the GWA window, all surface wellsites shall be located within a GWA window.

5.     On February 22, 2011, the Commission issued Order No. 535-4, which, among other things, established an approximate 640-acre drilling and spacing unit for Section 30, Township 6 North, Range 61 West, 6^th P.M., and approved one horizontal well within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the initial perforation and the ultimate bottomhole location being no closer than 600 feet from the boundaries of the unit without exception being granted by the Director. Section 30, Township 6 North, Range 61 West, 6^th P.M. is subject to this Order.

6.     On October 13, 2011, EOG, by its attorneys, filed with the Commission a verified application (“Application”) for an order authorizing a surface location exception from Rule 318A.a. for a proposed horizontal well, namely the Greasewood #15-30H Well, to be drilled from a surface location of 501 feet FSL and 2,639 feet FWL in the SE¼ SW¼ of Section 30, Township 6 North, Range 61 West, 6^th P.M.  Further, EOG alleges that the surface location will allow the optimum wellbore positioning for the horizontal development of the Niobrara Formation within the established drilling and spacing unit while maintaining the setback from the boundaries of the unit.

7.     On January 11, 2012, EOG, 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.

8.     Land testimony and exhibits submitted in support of the Application by Jason McLaren, Land Specialist for EOG, states that EOG has been unable to obtain an agreement with the surface owner on terms consistent with other surface owners with whom EOG has successfully resolved similar surface location issues in the area.  Testimony further states the interested parties (the surface owners) have been duly served with a copy of the Application and Notice of Hearing, that no protests have been made.  Testimony concludes that for optimal positioning of the horizontal wellbore in Section 10, EOG requests a surface location exception from Rule 318A.a.

9.     Geologic testimony and exhibits submitted in support of the Application by John H. Melby, Petroleum Geologist for EOG, states the Niobrara formation underlies the Application Lands, ranging in thickness from 206 to 272 feet, and constitutes a common source of supply.

10.   Engineering testimony and exhibits submitted in support of the Application by Osman G. Apaydin, Reservoir Engineer for EOG, state type wells within the Hereford Field effectively drain from 21 to 248 acres, depending on whether there is a possible matrix contribution or a fracture-only play.  Testimony concludes optimal positioning of a true vertical wellbore prior to turning the wellbore lateral in the Niobrara Formation, will minimize the possibility of drilling, completion, and production complications.

11.   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.

12.   The Application was reviewed by the Colorado Department of Public Health and Environment (“CDPHE”) pursuant to consultation provisions of Rule 306.d.  In a letter dated December 1, 2011, the CDPHE Oil & Gas Coordinator indicated that CDPHE does not believe any additional conditions of approval are necessary for approving the amended Application.

13.   EOG agreed to be bound by oral order of the Commission. 

14.   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 authorizing a surface location exception from Rule 318A.a. for a proposed horizontal well, namely the Greasewood #15-30H Well, to be drilled from a surface location of 501 feet FSL and 2,639 feet FWL in the SE¼ SW¼ of Section 30, Township 6 North, Range 61 West, 6^th P.M. for the production of oil, gas, and related hydrocarbons of the Niobrara Formation.

ORDER

                        NOW, THEREFORE IT IS ORDERED, that a well location exception from Rule 318A.a. is hereby authorized for a proposed horizontal well, namely the Greasewood #15-30H Well, to be drilled from a surface location of 501 feet FSL and 2,639 feet FWL in the SE¼ SW¼ of Section 30, Township 6 North, Range 61 West, 6^th P.M. for the production of oil, gas, and related hydrocarbons of the Niobrara Formation.

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   26^th  day of January, 2012, as of January 23, 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

January 26, 2012