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

REPORT OF THE COMMISSION

The Commission heard this matter on January 7, 2013, at the Sheraton Denver Downtown Hotel, 1550 Court Place, Denver, Colorado, upon application for an order to: 1) vacate the 80-acre drilling and spacing units established by Order No. 407-87, for lands subject to this Application, located in Sections 19 and 30, Township 6 North, Range 67 West, 6^th P.M.; and 2) establish two approximate 320-acre and 480-acre drilling and spacing units for Sections 19 and 30, Township 6 North, Range 67 West, 6^th P.M., and approve up to four horizontal wells within each unit, for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation.

FINDINGS

The Commission finds as follows:

1.         Great Western Oil & Gas Company, LLC (“Great Western” 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, 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.  Sections 19 and 30, Township 6 North, Range 67 West, 6^th P.M. are subject to this Order for the Codell-Niobrara Formation.

5.         On February 19, 1992, the Commission issued Order No. 407-87 (amended August 20, 1993) which, among other things, established 80-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations, with the permitted well locations in accordance with the provisions of Order No. 407-1.  Sections 19 and 30, Township 6 North, Range 67 West, 6^th P.M. are subject to this Order for the Codell-Niobrara Formation.

6.         On November 2, 2012 (Amended November 28, 2012), Great Western, by its attorneys, filed with the Commission pursuant to §34-60-116 C.R.S., a verified amended application (“Amended Application”) for an order to: 1) vacate all 80-acre drilling and spacing units established by Order No. 407-87 for the below-described lands (“Application Lands”); and 2) establish two approximate 294.78 and 445.07-acre drilling and spacing units for the Application Lands, and approve up to four horizontal wells within each drilling and spacing unit (for a total of eight), for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation, with the treated interval of the horizontal wellbores to be no closer than 460 feet from the unit boundaries, and no closer than 150 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

Township 6 North, Range 67 West, 6^th P.M. 

Section 30:      W½                                                     (“DSU #1” – 320-acre)

Township 6 North, Range 67 West, 6^th P.M.

Section 19:   SE¼

Section 30:      E½                                                      (“DSU #2” – 480-acre)

After a discussion regarding a discrepancy in the Application Lands, the Applicant and Commission staff agreed that the Application Lands should be listed as 320-acre for DSU #1 and 480-acre for DSU #2. 

7.         On December 19, 2012, Great Western, 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 K. Wade Pollard, Land Manager for Great Western, showed the surface of the Application Lands is owned in fee, the mineral ownership of the Application Lands is held in fee, that Great Western owns a partial leasehold ownership interest in the Application Lands, and that all of the interested parties received notice of the Application.

9.         Geologic testimony and exhibits submitted in support of the Application by Michael Mitchell, Senior Geologic Advisor for Great Western, showed the Codell Formation is approximately 14-25 feet thick, and the Niobrara Formation approximately 238 to 275 feet thick.  Testimony further showed the Codell-Niobrara Formation is present and continuous throughout the Application Lands.

10.       Engineering testimony and exhibits submitted in support of the Application by Carlos Ochoa, Reservoir Engineer for Great Western, showed the Raindance 3HN Well in DSU #1 has an estimated ultimate recovery  (“EUR”) of approximately 250 MBO of oil and 150 MMCF of gas, an estimated recovery factor of 5.85% per wellbore.  Testimony further showed the Raindance 1HN Well in DSU #2 has an estimated ultimate recovery  (“EUR”) of approximately 250 MBO of oil and 150 MMCF of gas, an estimated recovery factor of 3.87% per wellbore.  Testimony concluded the economics of the project are sound.

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.       Great Western agreed to be bound by oral order of the Commission. 

13.       Based on the facts stated in the verified Application, having received no protests, and based on the Hearings Officer review of the Application under Rule 511., the Commission should enter an 1) vacate the 80-acre drilling and spacing units established by Order No. 407-87, for lands subject to this Application, located in Sections 19 and 30, Township 6 North, Range 67 West, 6^th P.M.; and 2) establish two approximate 320-acre and 480-acre drilling and spacing units for Sections 19 and 30, Township 6 North, Range 67 West, 6^th P.M., and approve up to four horizontal wells within each unit, for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation.

ORDER

NOW, THEREFORE IT IS ORDERED, that the 80-acre drilling and spacing units established by Order No. 407-87 for the below-described lands, are hereby vacated.

IT IS FURTHER ORDERED, that two approximate 320-acre and 480-acre drilling and spacing units for the below-described lands, are hereby established, and up to four horizontal wells within each unit, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation, with the treated interval of the horizontal wellbores to be no closer than 460 feet from the unit boundaries, and no closer than 150 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

Township 6 North, Range 67 West, 6^th P.M. 

Section 30:      W½                                                     (“DSU #1” – 320-acre)

Township 6 North, Range 67 West, 6^th P.M.

Section 19:   SE¼

Section 30:      E½                                                      (“DSU #2” – 480-acre)

IT IS FURTHER ORDERED, that all horizontal wells shall be drilled from one surface location located within the drilling and spacing unit, subject to the existing surface use agreement and consent by the surface owner.

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 _15th_day of January, 2013, as of January 7, 2013.

CORRECTED this ______ day of June, 2013, as of January 7, 2013.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary