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

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

IN THE MATTER OF THE PROMULGATION ) CAUSE NO. 474

AND ESTABLISHMENT OF FIELD RULES TO )

GOVERN OPERATIONS IN THE CRAIG FIELD, ) ORDER NO. 474-5

MOFFAT COUNTY, COLORADO )

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 9:00 a.m. on February 23, 2009, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to establish a 320-acre drilling and spacing unit consisting of the E½ of Section 5, Township 6 North, Range 91 West, 6^th P.M., for the production of oil and associated hydrocarbons from the Niobrara Formation, and to allow one optional additional well to be drilled in said drilling and spacing unit, for a total of up to two wells, with a bottomhole location no closer than 660 feet to any outer boundary of the unit with no setback required to any interior quarter section line.

FINDINGS

The Commission finds as follows:

1. Samson Resources Company (“Samson”), 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. Rule 318.a. of the Rules and Regulations of the Commission requires that wells drilled in excess of 2,500 feet in depth be located not less than 600 feet from any lease line, and located not less than 1,200 feet from any other producible or drilling oil or gas well when drilling to the same common source of supply. Section 5, Township 6 North, Range 91 West, 6^thP.M., is subject to this Rule for the Niobrara Formation.

5. On January 5, 2009, Samson, by its attorney, filed with the Commission a verified application for an order to establish a 320-acre drilling and spacing unit consisting of the E½ of Section 5, Township 6 North, Range 91 West, 6^th P.M., for the production of oil and associated hydrocarbons from the Niobrara Formation, and to allow one optional additional well to be drilled in said drilling and spacing unit, for a total of up to two wells, with a bottomhole location no closer than 660 feet to any outer boundary of the unit with no setback required to any interior quarter section line.

6. On February 6, 2009, M.E. Denomy, President of the Rocky Mountain Chapter of the National Association of Royalty Owners, filed a written protest, on behalf of unidentified mineral interest owners underlying the application lands, requesting that the application be supported by “appropriate scientific documentation.” On February 12, 2009, Ms. Denomy filed a written withdrawal of said protest, and has filed a Rule 510 written statement in this matter in lieu of prosecuting said protest, which is available in the application file.

7. On February 10, 2009, Samson, 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.

8. Testimony and exhibits submitted in support of the application showed that Samson is the majority leasehold owner for the application lands.

9. Testimony and exhibits submitted in support of the application showed that based upon type logs, structure and isopach maps, as well as cross section analysis, the Niobrara Formation underlying the application lands has an average thickness of 280 feet comprised of calcareous benches reflecting that the Niobrara formation is a common source of supply. Additional testimony indicated that there is a fault-bounded anticline structure within the brittle calcareous intervals underlying the application lands which will allow for increased deliverability from an otherwise impermeable and uneconomic reservoir.

10. Testimony and exhibits submitted in support of the application showed that creation of a 320-acre drilling and spacing unit will promote the economical and efficient drainage of the Niobrara Formation underlying the application lands, and that 320 acres is not smaller than the maximum area that can be drained by this additional well recognizing that, due to the complexity of the fracture porosity of the calcareous intervals, an optional infill may be required necessary to adequately drain the Niobrara Formation reserves therein. Additional testimony showed a drainage area of approximately 194 acres is expected for each well completed in the Niobrara Formation underlying the application lands, and that drilling of wells under this application is an economic venture with a discounted payment of 3.74 years.

11. The above-referenced testimony and exhibits show that the proposed spacing and well density will allow more efficient and economic reservoir drainage, will prevent waste, and will not violate correlative rights.

12. Samson Resources Company agreed to be bound by oral order of the Commission.

13. Based on the facts stated in the verified application, having received one protest which was subsequently withdrawn, and based on the Hearing Officer review of the application under Rule 511.b., the Commission should enter an order to establish a 320-acre drilling and spacing unit consisting of the E½ of Section 5, Township 6 North, Range 91 West, 6^th P.M., for the production of oil and associated hydrocarbons from the Niobrara Formation, and to allow one optional additional well to be drilled in said drilling and spacing unit, for a total of up to two wells, with a bottomhole location no closer than 660 feet to any outer boundary of the unit with no setback required to any interior quarter section line.

ORDER

NOW, THEREFORE IT IS ORDERED, that a 320-acre drilling and spacing unit is hereby established for the E½ of Section 5, Township 6 North, Range 91 West, 6^th P.M., for the production of oil and associated hydrocarbons from the Niobrara Formation, and one optional additional well is hereby approved to be drilled in said drilling and spacing unit, for a total of up to two wells, with a bottomhole location no closer than 660 feet to any outer boundary of the unit with no setback required to any interior quarter section line.

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 March, 2009, as of February 23, 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

March 12, 2009