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

REPORT OF THE COMMISSION

The Commission heard this matter on July 9, 2012, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, upon application for an order to establish an approximate 640-acre drilling and spacing unit consisting of Section 24, Township 4 North, Range 62 West, 6^th P.M., to accommodate the planned Anschutz Spring Lake 16-24H Well, for the production of oil, gas and associated hydrocarbons from 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.         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.  Section 24, Township 4 North, Range 62 West, 6^th P.M. is subject to this rule for the Niobrara Formation.

5.         On April 27, 1988, 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 Cretaceous Age Formations from the base of the Dakota Formation to the surface. Rule 318A. supersedes all prior Commission drilling and spacing orders affecting well location and density requirements of Greater Wattenberg Area wells.   On December 5, 2005, Rule 318A was amended, among other things, to allow interior infill and boundary wells to be drilled and wellbore spacing units to be established.  On August 8, 2011, Rule 318A was again amended, among other things, to address drilling of horizontal wells.  Section 24, Township 4 North, Range 62 West, 6^th P.M. is subject to this rule for the Niobrara Formation.

6.         On January 5, 2012, EOG, by its attorneys, filed with the Commission a verified application (“Application”) for an order to establish an approximate 640-acre drilling and spacing unit for the below-described lands (“Application Lands”), to accommodate the planned Anschutz Spring Lake 16-24H Well, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the permitted wellbore to be located no closer than 600 feet from the boundaries of the proposed unit:

Township 4 North, Range 62 West, 6^th P.M.

Section 24:    All

7.         On February 22, 2012, EOG requested, and Commission Staff granted, a continuance to the April 16, 2012 hearing.

8.         On March 30, 2012, EOG requested, and Commission Staff granted, a continuance to the May 29, 2012 hearing.

9.         On May 15, 2012, EOG requested, and Commission Staff granted, a continuance to the July 9, 2012 hearing.

10.       On June 28, 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.

11.       Land testimony and exhibits submitted in support of the Application by Jason McLaren, Land Specialist for EOG, showed that the Applicant has either fully or partially leased the mineral interests in each section of the Application Lands, that the Application Lands are private fee leases and that the interested parties received notice of the Application.

12.       Geologic testimony and exhibits submitted in support of the Application by John H. Melby, Petroleum Geologist for EOG, showed the Niobrara Formation underlies most of the DJ Basin in northeastern Colorado.  An isopach map of the Niobrara Formation showed total thickness of the Niobrara Formation ranges from 268 to 278 feet in the Application Lands.  An array induction tool (AIT) type log for the Niobrara Formation showed that it consists of two members, the Smoky Hill Chalk and the Ft. Hayes Limestone.  A stratigraphic cross section of the Application Lands showed the Niobrara Formation exists under the entirety of the Application Lands as a common source of supply.

13.       Engineering testimony and exhibits submitted in support of the Application by Alejandro Albertoni, Reservoir Engineer for EOG, showed nearby type wells in the Hereford Field demonstrated estimated ultimate recovery (“EUR”) values between 30,000 to 350,000 barrels (“BBL”); and a drainage area ranging from 21 to 248-acres. Type wells in the analogous Silo field showed drainage estimates from 40 to 574-acres. Additional testimony indicated granting the proposed spacing application will promote efficient drainage, protect correlative rights, and avoid waste.

14.       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.

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

16.       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 establish an approximate 640-acre drilling and spacing unit consisting of Section 24, Township 4 North, Range 62 West, 6^th P.M., to accommodate the planned Anschutz Spring Lake #16-24H Well, a horizontal well, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

ORDER

NOW, THEREFORE IT IS ORDERED, that an approximate 640-acre drilling and spacing unit for the below-described lands, is hereby established, and a horizontal well within the unit, is hereby authorized, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the permitted wellbore to be located no closer than 600 feet from the boundaries of the proposed unit:

Township 4 North, Range 62 West, 6^th P.M.

Section 24:    All

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   11^th  day of July, 2012, as of July 9, 2012.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

July 11, 2012