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

REPORT OF THE COMMISSION

            The Commission heard this matter on July 29, 2013, at offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon application for an order to establish an approximate 960-acre horizontal drilling and spacing unit for Sections 13 and 24, Township 1 South, Range 66 West, 6^th P.M., and approve up to twelve horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Codell-Niobrara Formation.

FINDINGS

The Commission finds as follows:

1.         Great Western Operating 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 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 13 and 24, Township 1 South, Range 66 West, 6^th P.M. are subject to this Order for the Codell-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 13 and 24, Township 1 South, Range 66 West, 6^th P.M. are subject to Rule 318A for the Codell-Niobrara Formation. 

6.         On May 30, 2013, Great Western, by its attorneys, filed with the Commission pursuant to §34-60-116 C.R.S., a verified application (“Application”) for an order to establish an approximate 960-acre horizontal drilling and spacing unit for the below-described lands (“Application Lands”), and approve up to twelve horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Codell-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 1 South, Range 66 West, 6^th P.M.

Section 13:      All

Section 24:      N½

Applicant requested a finding by the Commission that Applicant may use its existing surface blanket bond to locate the wellpads for the proposed horizontal wells at a surface location outside the applicable GWA drilling window, within the unit.  Applicant will identify the GWA window to be forfeited in its Rule 511 testimony.

Applicant stated that existing vertical/directional wells within the unit shall be excluded from the proposed horizontal drilling and spacing unit, and that the allocation of proceeds from existing vertical/directional wells shall continue to pay on their current spacing or leasehold status.

7.         On July 16, 2013, 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 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, and that Great Western owns a partial leasehold ownership interest in the Application Lands.

9.         Geologic testimony and exhibits submitted in support of the Application by Glen A. Luebking, Contract Geologist for Great Western, showed the Codell Formation is present throughout the Application Lands, is approximately 7 to 14 feet thick, and the Niobrara Formation is present throughout the Application Lands, is approximately 49 to 81 feet thick, and both formations are generally of uniform thickness throughout the Application Lands.

10.       Engineering testimony and exhibits submitted in support of the Application by Jay Smith, Vice President of Engineering for Great Western, estimated drilling twelve horizontal wells within the unit would result in an estimated ultimate recovery (“EUR”) of 3,000,000 BOE of oil and 18,000,000 MCFE of gas, a recovery factor of approximately 17.80% within the unit, showing the economics of the project are sound.

            11.       The Commission finds Applicant may use its existing surface blanket bond to locate the wellpads for the proposed horizontal wells at a surface location outside the applicable GWA drilling window, within the unit.  Applicant identified the GWA window to be forfeited in its Rule 511 testimony.

12.       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.

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

14.       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 establish an approximate 960-acre horizontal drilling and spacing unit for Sections 13 and 24, Township 1 South, Range 66 West, 6^th P.M., and approve up to twelve horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Codell-Niobrara Formation.

ORDER

IT IS HEREBY ORDERED:

1.         An approximate 960-acre horizontal drilling and spacing unit for the below-described lands, is hereby established, and up to twelve horizontal wells within the unit, are hereby approved, for the production of oil, gas, and associated hydrocarbons from the Codell-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 1 South, Range 66 West, 6^th P.M.

Section 13:      All

Section 24:      N½

            2.         Applicant may use its existing surface blanket bond to locate the wellpads for the proposed horizontal wells at a surface location outside the applicable GWA drilling window, within the unit.  Applicant identified the GWA window to be forfeited in its Rule 511 testimony.

3.         Existing vertical/directional wells within the unit shall be excluded from the proposed horizontal drilling and spacing unit, and the allocation of proceeds from existing vertical/directional wells shall continue to pay on their current spacing or leasehold status.

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   27   day of August, 2013, as of July 29, 2013.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary