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

REPORT OF THE COMMISSION

            The Commission heard this matter on June 17, 2013, at the Two Rivers Convention Center, 159 Main Street, Grand Junction, Colorado, upon application for an order to approve up to eight horizontal wells within an approximate 640-acre drilling and spacing unit established for Section 21, Township 5 North, Range 61 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.         On April 27, 1998, the Commission entered 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 21, Township 5 North, Range 61 West, 6^th P.M. is subject to Rule 318A for the Niobrara Formation.

5.         On October 5, 2006, Bonanza Creek Energy Operating Company, LLC, completed the Pronghorn 31-21 Well (API No. 05-123-29990) (“Well”), having designated an approximate 160-acre drilling and spacing unit for the NE¼ of Section 21, Township 5 North, Range 61 West, 6^th P.M. to accommodate the Well, which produces oil, gas and associated hydrocarbons from the Niobrara Formation.  Under this Application BBC is not requesting a change to the unit acreage assigned to the Well or the distribution of proceeds from the Well.

6.         On February 22, 2011, the Commission entered Order No. 535-4 which, among other things, established 78 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 21, Township 5 North, Range 61 West, 6^th P.M. is subject to this Order for the Niobrara Formation.

7.         On March 7, 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 approve up to eight horizontal wells within an approximate 640-acre drilling and spacing unit established for the below-described lands (“Application Lands”) 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 460 feet from the unit boundaries, and no closer than 250 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

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

                        Section 21:                  All

Applicant requested the existing 160-acre drilling and spacing unit designated for the NE¼ of Section 21, Township 5 North, Range 61 West, 6^th P.M., to accommodate the Pronghorn 31-21 Well for the Niobrara Formation, be maintained and excluded from the proposed 640-acre drilling and spacing unit.

8.         On April 12, 2013, BBC requested and Commission staff granted, a continuance to the June 17, 2013 hearing.

9.         On June 4, 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.

10.       Land testimony and exhibits submitted in support of the Application by Hal Writer, Senior Landman for BBC, showed BBC owns substantial leasehold interests in the Application Lands.

11.       Geologic testimony and exhibits submitted in support of the Application by Jason F. Brand, Petroleum Geologist for BBC, showed the Niobrara Formation underlies the entirety of the Application Lands and ranges from approximately 260 to 265 feet thick in the Niobrara Formation, which underlies the entirety of the Application Lands.  Further testimony showed the Niobrara Formation is a sequence of chalks, marls and limestones and is a common source of supply.

12.       Engineering testimony and exhibits submitted in support of the Application by Mark Stouffer, Reservoir Engineering Advisor for BBC, showed the drainage area for nearby horizontal type wells averaged 39-acres for the Niobrara Formation.  Testimony concluded the 640-acre unit would accommodate up to 8 horizontal Niobrara wells, while protecting correlative rights of adjacent mineral owners.

13.       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.

14.       BBC agreed to be bound by oral order of the Commission. 

15.       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 approve up to eight horizontal wells within an approximate 640-acre drilling and spacing unit established for Section 21, Township 5 North, Range 61 West, 6^th P.M.), for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

ORDER

IT IS HEREBY ORDERED:

1.         Up to eight horizontal wells within an approximate 640-acre drilling and spacing unit established for the below-described lands, 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 460 feet from the unit boundaries, and no closer than 250 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

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

                        Section 21:                  All

2.         The existing 160-acre drilling and spacing unit designated for the NE¼ of Section 21, Township 5 North, Range 61 West, 6^th P.M., to accommodate the Pronghorn 31-21 Well for the Niobrara Formation, shall be maintained and excluded from the proposed 640-acre drilling and spacing unit.

IT IS FURTHER ORDERED:

1.         The provisions contained in the above order shall become effective immediately.

2.         The Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.

3.         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.

4.         An application for reconsideration by the Commission of this Order is not required prior to the filing for judicial review.

            ENTERED THIS  8^th  day of July, 2013, as of June 17, 2013.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary