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

REPORT OF THE COMMISSION

The Commission heard this matter on February 11, 2013, at the offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to vacate two approximate 640-acre drilling and spacing units established by Order No. 535-4 for Sections 9 and 10, Township 4 North, Range 62 West, 6^th P.M. and establish an approximate 1,280-acre laydown drilling and spacing unit and approve up to 16 horizontal wells within the unit, 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.         On February 22, 2011, the Commission entered Order No. 535-4 (subject to pending corrections) which, among other things, established 640-acre drilling and spacing units for certain lands, and approved one horizontal well within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the wellbore to be no closer than 460 feet from the boundaries of the unit, without exception being granted by the Director.  Sections 9 and 10, Township 4 North, Range 62 West, 6^th P.M. are subject to this Order 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.  Sections 9 and 10, Township 4 North, Range 62 West, 6^th P.M. are subject to Rule 318A for the Niobrara Formation.

6.         On December 13, 2012, BBC, by its attorneys, filed with the Commission pursuant to §34-60-116 C.R.S., a verified application (“Application”) for an order to: 1) vacate two approximate 640-acre drilling and spacing units established by Order No. 535-4 for Sections 9 and 10, Township 4 North, Range 62 West, 6^th P.M.; and 2) establish an approximate 1,280-acre laydown drilling and spacing unit for the below-described lands (“Application Lands”), and approve up to 16 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 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 4 North, Range 62 West, 6^th P.M.

Section 9:        All

Section 10:      All

7.         On January 29, 2013, 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.

8.         Land testimony and exhibits submitted in support of the Application by Colleen Kennedy, Senior Landman for BBC, showed BBC’s leasehold interest of 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 Jason F. Brand, Petroleum Geologist for BBC, showed the regional dip for the Niobrara Formation underlying the Application Lands is approximately 70 feet per mile to the northwest and that the Niobrara Formation under the Application Lands is approximately 250 to 270 feet thick.  Testimony further showed the Niobrara Formation is present and continuous throughout the Application Lands.

10.       Engineering testimony and exhibits submitted in support of the Application by Mark Stouffer, Reservoir Engineering Advisor for BBC, showed that nearby horizontal type wells have calculated drainage areas between 19 to 85 acres, with an average of 44 acres.  Further testimony showed that the estimated ultimate recovery (“EUR”) of a 1,280-acre spaced horizontal well with a long lateral will be approximately 1.75 times that of a 640-acre well with shorter lateral, and the average drainage area for a 1,280-acre well is expected to be approximately 77 acres.  Placing sixteen 1,280-acre spaced horizontal wells would drain a total of 1,232 acres, which is smaller than the proposed 1,280 acre spacing unit. 

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.       BBC 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 Hearing Officer review of the Application under Rule 511., the Commission should enter an order to vacate two approximate 640-acre drilling and spacing units established by Order No. 535-4 for Sections 9 and 10, Township 4 North, Range 62 West, 6^th P.M. and to establish an approximate 1,280-acre laydown drilling and spacing unit for Sections 9 and 10, Township 4 North, Range 62 West, 6^th P.M. and approve up to 16 horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

ORDER

            NOW, THEREFORE IT IS ORDERED, that two approximate 640-acre drilling and spacing units established by Order No. 535-4 for Sections 9 and 10, Township 4 North, Range 62 West, 6^th P.M., are hereby vacated, and an approximate 1280-acre drilling and spacing unit for the below-described lands, is hereby established, and up to 16 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 wellbore to be located 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 4 North, Range 62 West, 6^th P.M.

Section 9:        All

Section 10:      All

IT IS FURTHER ORDERED, that any permitted wells under this Order, whether horizontal, vertical or directional,  shall be drilled from a new, common or existing well pad, with no more than one well pad per quarter quarter section, and from surface locations consistent with provisions found in Rule 318A. without exception being granted by the Director.

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 _____ day of February, 2013, as of February 11, 2013.

                                                OIL AND GAS CONSERVATION COMMISSION

                                                OF THE STATE OF COLORADO

                                                By____________________________________       

                                                            Robert J. Frick, Secretary