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

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 9:00 a.m. on May 7, 2009, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to allow the equivalent of one well per 10 acres for Sections 9 and 10 and the NW¼ of Section 11, Township 7 South, Range 95 West, 6^th P.M., for the production of gas and associated hydrocarbons from the Williams Fork Formation, with the permitted well to be located no closer than 200 feet from the unit boundary.

FINDINGS

The Commission finds as follows:

1.     Williams Production RMT Company (“Williams”), 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 May 18, 1990, the Commission issued Order No. 440-12, which among other things, established 320-acre drilling and spacing units for certain lands, including Sections 9 through 11, Township 7 South, Range 95 West, 6^th P.M., and allowed the option to drill a total of up to three (3) wells in each unit, for the production of gas and associated hydrocarbons from the Mesaverde Formation, with the permitted well to be located no closer than 600 feet from the boundaries of the drilling unit and no closer than 1200 feet to any well or wells producing from the same formation.

5.     On February 21, 1995, the Commission issued Order Nos. 139-28 and 440-16, which among other things, established 320-acre drilling and spacing units for certain lands, including the E½ of Section 10 and all of Section 11, Township 7 South, Range 95 West, 6^th P.M., and allowed the option to drill up to eight (8) wells per unit, for the production of gas and associated hydrocarbons from the Williams Fork Formation.

6.     On July 30, 1997, the Commission issued Order Nos. 139-31 and 440-18, which among other things, allowed the optional drilling of up to eight (8) wells per 320-acre drilling and spacing unit for certain lands, including the W½ of Section 10, Township 7 South, Range 95 West, 6^th P.M., for the production of gas and associated hydrocarbons from the Williams Fork Formation.

7.     On March 16, 2009, Williams, by its attorney, filed with the Commission a verified application for an order to allow the equivalent of one well per 10 acres to be drilled into and produced from the Williams Fork Formation for the below listed lands:

Township 7 South, Range 95 West, 6^th P.M.

The application further proposes that all future wells drilled, for the Williams Fork Formation, upon such lands should be located downhole anywhere within a particular drilling and spacing unit but no closer than 100 feet from the outside boundary of the unit unless such boundary abuts or corners lands in respect of which the Commission has not at the time of the drilling permit application granted the right to drill 10-acre density wells, in which event the Williams Fork Formation wells to be drilled upon the application lands should be drilled downhole no closer than 200 feet from that portion of the boundary of the unit which so abuts or corners the lands in respect of which 10-acre density downhole drilling for Williams Fork Formation wells has not been ordered by the Commission.

Except as previously authorized by order of the Commission, wells to be drilled under this application will be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section (or lots or parcels approximately equivalent thereto), unless exception is granted by the Director of the Colorado Oil and Gas Conservation Commission pursuant to application made for such exception as set forth by Rule 318.c.

8.     On April 21, 2009, Williams, by its attorney, 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.     Testimony and exhibits submitted in support of the application showed that Williams is the majority leasehold owner for the application lands, and that those lands are adjacent to lands that have been approved for 10-acre well density for the Williams Fork Formation.

10.   Testimony and exhibits submitted in support of the application showed that the geologic model for the Williams Fork Formation in the Piceance Basin is well understood and, as to the model for said formation underlying the application lands, it consists of extensive cross-sectional analysis, production and reservoir data from nearby wells drilled on 10-acre density.  Additional testimony indicated that the Williams Fork Formation in the area of the application lands is a non-marine deposit comprised of sandstone, shales and coals deposited in a coastal plain setting, and that the productive sandstones throughout the Williams Fork Formation are laterally discontinuous and naturally fractured with microdarcy permeability and an average porosity of between 6 to 10%.  Testimony showed that, due to the nature of the depositional environment and the reservoir properties of the Williams Fork Formation underlying the application lands, 10-acre well density is justified and the most efficient and economical way to develop the resources without affecting correlative rights.  

11.   Testimony and exhibits submitted in support of the application demonstrated that pressure testing of 10-acre density wells completed in the Williams Fork Formation, in the vicinity of the application lands, indicated limited or no communication between the wells, and that decline curve analysis is consistent with that same premise.  Additional testimony showed that gas-in-place calculations for 10-acre density wells in the Williams Fork Formation support an estimated ultimate recovery of 19 BCF with a 73% recovery factor of original gas-in-place, and that an incremental additional recovery of approximately 30% is expected from said formation underlying the application lands when well density is increased from 20 acres to 10 acres.           

12.   The above-referenced testimony and exhibits show that the proposed increased well density will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas, and will not violate correlative rights.

13.   Williams Production RMT Company 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.c., the Commission should enter an order to allow the equivalent of one well per 10 acres for Sections 9 and 10 and the NW¼ of Section 11, Township 7 South, Range 95 West, 6^th P.M., for the production of gas and associated hydrocarbons from the Williams Fork Formation, with the permitted well to be located no closer than 200 feet from the boundary of a given drilling and spacing unit.

ORDER

NOW, THEREFORE IT IS ORDERED, that the equivalent of one well per 10 acres, is hereby approved to be drilled on the below-listed lands, for the production of gas and associated hydrocarbons from the Williams Fork Formation:

Township 7 South, Range 95 West, 6^th P.M.

IT IS FURTHER ORDERED, that all future wells drilled, for the Williams Fork Formation, upon such lands shall be located downhole anywhere but no closer than 100 feet from the outside boundary of a particular drilling and spacing unit unless such boundary abuts or corners lands in respect of which the Commission has not at the time of the drilling permit application granted the right to drill 10-acre density wells, in which event the Williams Fork Formation wells to be drilled upon the application lands shall be drilled downhole no closer than 200 feet from that portion of the boundary of the unit which so abuts or corners the lands in respect of which 10-acre density downhole drilling for Williams Fork Formation wells has not been ordered by the Commission.

IT IS FURTHER ORDERED, that except as previously authorized by order of the Commission, wells to be drilled under this application shall be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section (or lots or parcels approximately equivalent thereto), unless exception is granted by the Director of the Colorado Oil and Gas Conservation Commission pursuant to application made for such exception as set forth by Rule 318.c.

IT IS FURTHER ORDERED, that except as previously authorized by order of the Commission, wells to be drilled under this application will be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section (or lots or parcels approximately equivalent thereto), unless exception is granted by the Director of the Colorado Oil and Gas Conservation Commission pursuant to application made for such exception as set forth by Rule 318.c.

IT IS FURTHER ORDERED, that the provisions contained in the above order, shall become effective forthwith.

                        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 thirty (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 May, 2009, as of May 7, 2009.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________       

                                                                                    Robert A. Willis, Acting Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

May 14, 2009