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

REPORT OF THE COMMISSION

The Commission heard this matter on November 15, 2012, at the offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon application for an order to establish an approximate 640-acre drilling and spacing unit, and approve up to four horizontal wells within the unit, for Section 9, Township 7 North, Range 62 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

FINDINGS

The Commission finds as follows:

1.         Bill Barrett Corporation (“BBC” 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 9, Township 7 North, Range 62 West, 6^th P.M. is presently unspaced with respect to the Niobrara Formation, which is a common source of supply underlying said lands.

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, the Commission adopted Rule 318A(I).a.(4)D. which, among other things, requires a horizontal wellbore spacing unit to be designated for each proposed horizontal well located within the Greater Wattenberg Area (“GWA”).  The horizontal wellbore spacing unit may be of different sizes and configurations depending on the lateral length and orientation of the wellbore but is to be comprised of the governmental quarter-quarter sections in which the wellbore lateral penetrates the productive formation as well as any governmental quarter-quarter sections that are located less than 460 feet from the portion of the wellbore lateral that penetrates the productive zone regardless of section or quarter section lines.  Section 9, Township 7 North, Range 62 West, 6^th P.M. is subject to Rule 318A for the Niobrara Formation.

6.         On September 17, 2012, Bill Barrett Corporation (“BBC” or Applicant”), by its attorneys, filed with the Commission pursuant to § 34-60-116 C.R.S., a verified application (“Application”) for an order to: 1) establish an approximate 640-acre drilling and spacing unit for the below-described lands (“Application Lands”), and approve up to four horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the wellbore to be located no closer than 600 feet from the unit boundaries and no closer than 1200 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director; and 2) pool all interests in an approximate 640-acre drilling and spacing unit established for the Application Lands, for the development and operation of the Niobrara Formation, effective as of the earlier of the date of the Application, or the date that any of the costs specified in C.R.S. § 34-60-116(7)(b)(II) were first incurred for the drilling of the Cass Farms 11-9H Well (API No. 05-123-32689), and to subject any nonconsenting interests to the cost recovery provisions of C.R.S. § 34-60-116(7):

Township 7 North, Range 62 West, 6^th P.M.

                        Section 9:  All

7.         On November 1, 2012, BBC, by its attorneys, filed with the Commission a written request to bifurcate the application and to continue the portion of the Application which requested statutorily pooling of all interests.

8.         On November 2, 2012, BBC, 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.

9.         Land testimony and exhibits submitted in support of the Application by Colleen Kennedy, Senior Landman for BBC, showed that BBC holds a leasehold interest in the Application Lands.

10.       Geologic testimony and exhibits submitted in support of the Application by Jason F. Brand, Petroleum Geologist for BBC, showed the regional dip for the Niobrara Formation underlying the Application Lands is approximately 45 feet per mile westerly and the total thickness ranges 235 to 275 feet thick.

11.       Engineering testimony and exhibits submitted in support of the Application by Mark Stouffer, Reservoir Engineering Advisor for BBC, showed the estimated ultimate recovery (“EUR”) for the wells varied between 15,000 and 890,000 barrels (“BBL”), a recovery factor of 5%.  Testimony showed the drainage area from the horizontal well is expected to be 261-acres.  Testimony concluded that granting the proposed spacing application will result in efficient and economic development of Application Lands.

12.       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.

13.       BBC 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 to establish an approximate 640-acre drilling and spacing unit, and approve up to four horizontal wells within the unit, for Section 9, Township 7 North, Range 62 West, 6^th P.M., 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 up to four horizontal wells within the unit, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the horizontal wellbore to be no closer than 600 feet from the unit boundaries, and no closer than 1200 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

            Township 7 North, Range 62 West, 6^th P.M.

            Section 9:  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 26^th day of November, 2012, as of November 15, 2012.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________         

                                                                                    Robert J. Frick, Secretary