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

REPORT OF THE COMMISSION

The Commission heard this matter on August 20, 2012, at the offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon application for an order to approve the equivalent of one well per 10-acres to be drilled, for Section 12, Township 7 South, Range 96 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Williams Fork and Iles Formations of the Mesaverde Group.

FINDINGS

The Commission finds as follows:

1.         WPX Energy Rocky Mountain, LLC (“WPX” 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 20, 1990, the Commission issued Order No. 479-2 which, among other things, established two approximate 320-acre drilling and spacing units, 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 unit boundaries and no closer than 1,200 feet from any well producing or producible from the same formation, and that an additional well may be drilled for production from the Mesaverde Formation, with the optional well to be located in accordance with the stated rule.  Section 12, Township 7 South, Range 96 West, 6^th P.M. is subject to Order No. 479-2 for the Williams Fork and Iles Formations of the Mesaverde Group.

5.         On June 21, 2012, WPX, by its attorneys, filed with the Commission pursuant to § 34-60-116 C.R.S., a verified application (“Application”) for an order to approve the equivalent of one well per 10-acres to be drilled, for the below-described lands (“Application Lands”), for the production of oil, gas and associated hydrocarbons from the Williams Fork and Iles Formations of the Mesaverde Group:

                                                Township 7 South, Range 96 West, 6^th P.M.

                                                Section 12:    E½

Applicant confirmed all future Williams Fork or Iles Formation wells on the Application Lands shall be located downhole anywhere upon the Application Lands but no closer than 100 feet from the boundaries of any lease line unless such unit 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 downhole drilling for the Williams Fork or Iles Formation, in which event the Williams Fork or Iles Formation wells to be drilled shall be drilled downhole no closer than 200 feet from the boundaries of any lease line so abutting or cornering such lands which the Commission has not ordered 10-acre density downhole drilling for the Williams Fork or Iles Formation wells.  That all wells to be drilled under the Application will be drilled from the surface, either vertically or directionally, from no more than one pad located on a given quarter quarter section, unless exception is granted by the Director.

6.         On August 7, 2012, WPX, 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.

                        7.         Land Testimony and exhibits submitted in support of the Application by Annette Apperson, Landman for WPX, showed WPX is a leasehold owner in the Application Lands.  Further testimony and exhibits submitted indicated that lands in the vicinity of the Application Lands have been approved for 10-acre well density for the Williams Fork.

                        8.         Geological Testimony and exhibits submitted in support of the Application by Susan D. Anderson, Geologist for WPX, showed the geologic model for the Williams Fork Formation in the Piceance Basin is well understood, consisting of extensive cross-sectional analysis, production and reservoir data from nearby wells drilled at a 10-acre density.  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.

                        9.         Engineering Testimony and exhibits submitted in support of the Application by Chris Caplis, Petroleum Engineer for WPX, showed that pressure testing of the 10-acre density type wells completed in the Williams Fork Formation showed 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 billion cubic feet of natural gas with a 73% recovery factor of original gas-in-place.  Testimony concluded that incremental additional recovery of approximately 30% is expected from the Williams Fork Formation underlying the Application Lands when well density is increased from 20-acre to 10-acre spacing.

10.       The Application was reviewed by the Colorado Department of Public Health and Environment (“CDPHE”) pursuant to consultation provisions of Rule 306.d.  In a letter dated July 7, 2012, the CDPHE Oil & Gas Coordinator indicated that CDPHE does not believe any additional conditions of approval are necessary for approving the Application.

11.       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.

12.       WPX agreed to be bound by oral order of the Commission. 

13.       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 the equivalent of one well per 10-acres to be drilled, for Section 12, Township 7 South, Range 96 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Williams Fork and Iles Formations of the Mesaverde Group.

ORDER

NOW, THEREFORE IT IS ORDERED, that the equivalent of one well per 10-acres to be drilled, for the below-described lands, is hereby approved, for the production of oil, gas and associated hydrocarbons from the Williams Fork and Iles Formations of the Mesaverde Group:

                                                Township 7 South, Range 96 West, 6^th P.M.

                                                Section 12:    E½

IT IS FURTHER ORDERED, that all future Williams Fork or Iles Formation wells on the Application Lands shall be located downhole anywhere upon the Application Lands but no closer than 100 feet from the boundaries of any lease line unless such unit 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 downhole drilling for the Williams Fork or Iles Formation, in which event the Williams Fork or Iles Formation wells to be drilled shall be drilled downhole no closer than 200 feet from the boundaries of any lease line so abutting or cornering such lands which the Commission has not ordered 10-acre density downhole drilling for the Williams Fork or Iles Formation wells.

IT IS FURTHER ORDERED, that all wells drilled under the Application will be drilled from the surface, either vertically or directionally, from no more than one pad located on a given quarter quarter section, unless exception is granted by the Director.

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

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 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, 2012, as of August 20, 2012.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________         

                                                                                    Robert J. Frick, Secretary

Dated: August 30, 2012