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 August 18, 2009, at the La Quinta Inn & Suites, 2833 Toupal Drive, Trinidad, Colorado, for an order to pool all nonconsenting owners in the approximate 240-acre drilling and spacing unit, consisting of the SW¼ and W½ SE¼ of Section 17, Township 7 South, Range 95 West 6^th P.M., for the development and operation of the Williams Fork and Iles Formations.

FINDINGS

The Commission finds as follows:

1.    Antero Resources Piceance Corporation (“Antero”), 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 Section 17, Township 7 South, Range 95 West, 6^th P.M., for the production of gas and associated hydrocarbons from the Mesaverde Formation, with the designation as either E½ and W½ stand-up units or N½ and S½ lay-down units at the discretion of the operator of the first well permitted, with the permitted well to be located on the established unit no closer than 600 feet from the boundaries of the unit and no closer than 1200 feet from any well producing or producible from the same formation.

5.    On August 28, 2007, the Commission issued Order No. 440-48, which among other things, vacated the designated 320-acre drilling and spacing unit consisting of the E½ of Section 17, Township 7 South, Range 95 West, 6^th P.M., established four approximate 40-acre drilling and spacing units, and approved 20-acre well density for the E½ E½ of said Section 17, for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations. 

6.    On August 18, 2009, the Commission among other things, vacated the designated 320-acre drilling and spacing unit consisting of the W½ of Section 17, Township 7 South, Range 95 West, 6^th P.M., for the production of gas and associated hydrocarbons from the Mesaverde Formation, and established an approximate 240-acre drilling and spacing unit for the SW¼ and W½ SE¼ of said Section 17, and approved said unit for 10-acre well density, for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.  Acting in accordance with § 34-60-116(6), C.R.S., the afore-referenced 240-acre drilling and spacing unit was established by the Commission prior to the Commission acting on the application in this matter, which requested the Commission to pool all nonconsenting interest owners within said drilling and spacing unit.

7.    On June 29, 2009, Antero, by its attorney, filed with the Commission a verified application to pool all nonconsenting owners in the approximate 240-acre drilling and spacing unit, consisting of the SW¼ and W½ SE¼ of Section 17, Township 7 South, Range 95 West 6^th P.M., for the development and operation of the Williams Fork and Iles Formations.

8.    On July 13, 2009, Sharon Gardner, by her attorney, filed a Protest with the Commission.  On August 5, 2009, the Hearing Officer presided over a prehearing conference convened in accordance with Rule 527.  On August 17, 2009, Sharon Gardner, by her attorney, contacted the Commission and orally withdrew her Protest, and on August 19, 2009, the Commission received said Withdrawal of Protest.

9.    On August 3, 2009, EnCana Oil & Gas (USA) Inc. (“EnCana”), by its attorney, filed a Protest with the Commission.  On August 5, 2009, the Hearing Officer presided over a prehearing conference convened in accordance with Rule 527.  On August 12, 2009, EnCana, by its attorney, filed its Withdrawal of Protest with the Commission.

10.  On August 18, 2009, Antero, by its attorney, moved the Commission to approve the application based on the merits of the verified application and the supporting exhibits as is provided for by Rule 511.  Sworn written testimony and exhibits were submitted in support of the application.

11.  Testimony and exhibits showed that Antero is the majority mineral leaseholder of lands underlying the application lands.  Additional testimony showed a list of all consenting and nonconsenting owners for the respective drilling and spacing unit.  Further testimony indicated that offers to lease or to participate were sent to the nonconsenting owners, and that said offers were sent via US Mail, at least 30 days prior to the August 18, 2009 hearing, to the nonconsenting owners.  Testimony showed that the offers to lease/participate and the Authorizations for Expenditures were fair and reasonable, and similar to those prevailing in the area, and that Antero has complied with the requirements of Rule 530.a. and §34-60-117(7)(d), C.R.S.

13.  Antero Resources Piceance Corporation agreed to be bound by oral order of the Commission. 

14.  Based on the facts stated in the verified application, having received two protests which were subsequently withdrawn, and based on the Hearing Officer review of the application under Rule 511., the Commission should enter an order to pool all nonconsenting owners in the approximate 240-acre drilling and spacing unit, consisting of the SW¼ and W½ SE¼ of Section 17, Township 7 South, Range 95 West 6^th P.M., for the development and operation of the Williams Fork and Iles Formations.

ORDER

NOW, THEREFORE IT IS ORDERED, that,  1.  Pursuant to the provisions of §34-60-116, C.R.S., as amended, of the Oil and Gas Conservation Act of the State of Colorado, the nonconsenting interests in the approximate 240-acre drilling and spacing unit, consisting of the SW¼ and W½ SE¼ of Section 17, Township 7 South, Range 95 West 6^th P.M., are hereby pooled, for the development and operation of the Williams Fork and Iles Formations.

2.    The production obtained from the drilling and spacing unit shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within the drilling and spacing unit; each owner of an interest in the drilling and spacing unit shall be entitled to receive his/her share of the production of the well located on the drilling and spacing unit applicable to his/her interest in the drilling and spacing unit.

3.    Said unleased mineral owners are hereby deemed to have elected not to participate and shall therefore be deemed to be nonconsenting as to the well and future wells and be subject to the penalties as provided for by §34-60-116(7), C.R.S.

4.    The nonconsenting unleased mineral owners within the drilling and spacing unit shall be treated as the owner of the landowner's royalty to the extent of 12.5% of his/her record title interest, whatever that interest may be, until such time as the consenting owner recovers, only out of the nonconsenting owner's proportionate 87.5% share of production, the costs specified in §34-60-116(7)(b), C.R.S. as amended.  After recovery of such costs, each nonconsenting mineral owner shall then own his/her proportionate 8/8ths share of the well, surface facilities and production, and then be liable for his/her proportionate share of further costs incurred in connection with the well as if he/she had originally agreed to the drilling.

5.    The operator of the well drilled on the above-described unit shall furnish the nonconsenting owners with a monthly statement of all costs incurred, together with the quantity of oil and gas produced, and the amount of proceeds realized from the sale of production during the preceding month.

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 August, 2009, as of August 18, 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

August 25, 2009