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: 1) vacate an approximate 640-acre drilling and spacing unit established by Order No. 535-4 for Section 25, Township 6 North, Range 62 West, 6^th P.M.; and 2) establish an approximate 320-acre drilling and spacing unit for Section 25, Township 6 North, Range 62 West, 6^th P.M., and approve one horizontal well 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 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.  Section 25, Township 6 North, Range 62 West, 6^th P.M. is 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.  Section 25, Township 6 North, Range 62 West, 6^th P.M. is subject to Rule 318A for the Niobrara Formation.

            6.         On January 24, 2013, BBC, by its attorneys, filed with the Commission pursuant to §34-60-116 C.R.S., a verified application (“Application”) for an order to vacate the approximate 640-acre drilling and spacing unit established by Order No. 535-4 for Section 25, Township 6 North, Range 62 West, 6^th P.M. and establish an approximate 320-acre drilling and spacing unit for the below-described lands (“Application Lands”), and approve one horizontal well within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with  the treated interval of such wells no closer than 460 feet from the boundaries of the proposed unit, without exception being granted by the Director:

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

                                    Section 25:      W½

Applicant further requests that the Commission declare that upon the Commission’s order vacating the approximate 640-acre drilling and spacing unit established by Order No. 535-4 for Section 25, Township 6 North, Range 62 West, 6^th P.M., the E½ of Section 25, Township 6 North, Range 62 West, 6^th P.M., will no longer be subject to a spacing order, and will revert to Rule 318A for well location, spacing and unit designation, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

7.         On March 12, 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 that BBC owns a majority of the mineral leasehold  interest underlying the Application Lands.

9.         Geologic testimony and exhibits submitted in support of the Application by Jason F. Brand, Petroleum Geologist for BBC, showed that the Niobrara Formation exists under all of the Application Lands. Additional testimony showed that the total thickness of the Niobrara Formation under the Application Lands ranges from approximately 260 feet to 265 feet thick.  Additional testimony showed the Niobrara Formation exists under the entirety of the Application Lands and is a common source of supply.

10.       Engineering testimony and exhibits submitted in support of the Application by Mark Stouffer, Reservoir Engineering Advisor for BBC, showed that calculated drainage areas for horizontal Niobrara wells range from 7 to 155 acres within a 640-acre length lateral, with an average of 56 acres.  Additional testimony showed that placing one horizontal Niobrara well within the proposed unit will not adversely impact correlative rights and will avoid waste.

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: 1) vacate an approximate 640-acre drilling and spacing unit established by Order No. 535-4 for Section 25, Township 6 North, Range 62 West, 6^th P.M.; and 2) establish an approximate 320-acre drilling and spacing unit for Section 25, Township 6 North, Range 62 West, 6^th P.M., and approve one horizontal well 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 No. 535-4 for Section 25, Township 6 North, Range 62 West, 6^th P.M., is hereby vacated.

            IT IS FURTHER ORDERED, that an approximate 320-acre drilling and spacing unit for the below-described lands, is hereby established, and one horizontal well within the unit, is 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 located no closer than 460 feet from the boundaries of the proposed unit, without exception being granted by the Director:

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

                                    Section 25:      W½

            IT IS FURTHER ORDERED, that the  E½ of Section 25, Township 6 North, Range 62 West, 6^th P.M., will no longer be subject to a spacing order, and will revert to Rule 318A for well location, spacing and unit designation, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

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 Procedures 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