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

REPORT OF THE COMMISSION

The Commission heard this matter on March 25, 2013, at the offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon application for an order to vacate an approximate 640-acre drilling and spacing unit established by Order Nos. 407-380 and 407-633 for Section 17, Township 5 North, Range 61 West, 6^th P.M., and establish an approximate 640-acre drilling and spacing unit for Section 17, Township 5 North, Range 61 West, 6^th P.M., and approve up to ten 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.         Bonanza Creek Energy Operating Company LLC ("Bonanza" 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 November 29, 2010, the Commission entered Order No. 407-380 which, among other things, established 15 approximate 640-acre drilling and spacing units, and approved one horizontal well within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.  Section 17, Township 5 North, Range 61 West, 6^th P.M. is subject to this Order for the Niobrara Formation.

5.         On May 29, 2012, the Commission entered Order No. 407-633 which, among other things, approved one or more additional horizontal wells within each of fifteen approximate 640-acre drilling and spacing units, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation. Section 17, Township 5 North, Range 61 West, 6^th P.M. is subject to this Order for the Niobrara Formation.

6.         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 17, Township 5 North, Range 61 West, 6^th P.M. is subject to Rule 318A for the Niobrara Formation.

7.         On January 21, 2013 (amended February 20, 2013), Bonanza, 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 an approximate 640-acre drilling and spacing unit established by Order Nos. 407-380 and 407-633 for the below-described lands (“Application Lands”); and 2) establish an approximate 640-acre drilling and spacing unit for the Application Lands, and approve up to ten 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 in the Niobrara Formation no closer than 460 feet from the unit boundaries, and no closer than 150 feet from the treated interval of any other wellbore producing from the same source of supply, without exception being granted by the Director:

Township 5 North, Range 61 West, 6^th P.M.

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8.         On March 11, 2013, Bonanza, 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 Jared Rush, Landman for Bonanza, showed that Bonanza holds oil and gas leasehold interests in the Niobrara Formation in the Application Lands, and Bonanza has drilled and completed the horizontal Pronghorn 31-34-17HZ well on the Application Lands to the Niobrara Formation, on a 640-acre unit established by Commission Orders 407-380 and 407-633.  The testimony further showed that Bonanza has discovered that as to the Application Lands certain interested parties were omitted from the notice lists in the Commission proceedings which led to entry of Orders 407-380 and 407-633.

10.       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.

11.       Bonanza agreed to be bound by oral order of the Commission. 

12.       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 an approximate 640-acre drilling and spacing unit established by Order Nos. 407-380 and 407-633 for Section 17, Township 5 North, Range 61 West, 6^th P.M., and establish an approximate 640-acre drilling and spacing unit for Section 17, Township 5 North, Range 61 West, 6^th P.M., and approve up to ten 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 an approximate 640-acre drilling and spacing unit established by Order Nos. 407-380 and 407-633 for Section 17, Township 5 North, Range 61 West, 6^th P.M., is hereby vacated, and an approximate 640-acre drilling and spacing unit for the below-described lands, is hereby established, and up to ten 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 such wells in the Niobrara Formation no closer than 460 feet from the boundaries of the spacing unit, and no closer than 150 feet from the treated interval in another well producing from the same source of supply, without exception being granted by the Director:

Township 5 North, Range 61 West, 6^th P.M.

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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   5^th   day of April, 2013, as of March 25, 2013.      

                                                            OIL AND GAS CONSERVATION COMMISSION

                                                            OF THE STATE OF COLORADO

                                                                                                                                                                                                                        By____________________________________       

                                                                        Robert J. Frick, Secretary