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 January 11, 2010, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to amend Order No. 528-1 to rescind the requirement that any Iles and Sego Formation wells shall be drilled only in conjunction with the drilling of Williams Fork Formation wells for Section 3, Township 3 South, Range 97 West, 6^th P.M., for the production of gas and associated hydrocarbons from the Mesaverde Group.

FINDINGS

The Commission finds as follows:

1.    Whiting Oil and Gas Corporation (“Whiting”), 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 October 23, 2006, the Commission issued Order No. 528-1, which among other things, allowed the equivalent of one well per 10 acres to be drilled in Section 3, Township 3 South, Range 97 West 6^th P.M., for the production of gas and associated hydrocarbons from the Williams Fork, Iles and Sego Formations, with the permitted well to be located no closer than 100 feet from the outside boundary for Williams Fork Formation wells and no closer than 400 feet from the outside boundary for Iles and Sego Formation wells, and that Iles and Sego Formation wells shall be drilled only in conjunction with the drilling of Williams Fork Formation wells.

5.    On October 13, 2009, Whiting, filed with the Commission a verified application for an order to amend Order No. 528-1 to rescind the requirement that the Iles and Sego Formation wells shall be drilled only in conjunction with the drilling of Williams Fork Formation wells for Section 3, Township 3 South, Range 97 West, 6^th P.M., for the production of gas and associated hydrocarbons from the Mesaverde Group because Whiting wants to drill Iles and Sego wells with the same setback as Williams Fork Formation wells.

All future Iles and Sego Formation wells drilled under this application should be no closer than 100 feet from the outside boundary of the application lands, unless such boundary abuts or corners lands for which the Commission has not at the time of drilling permit application granted the right to drill 10-acre density Iles and Sego Formation wells, and such abutting or cornering lands are not in a federal unit that allows drilling of 10-acre density Iles and Sego Formation wells.  Where the application lands abut or corner lands for which the Commission has not at the time of drilling permit application granted the right to drill 10-acre density Iles and Sego Formation wells, and such abutting or cornering lands are not in a federal unit that allows drilling of 10-acre density Iles and Sego Formation wells, Iles and Sego Formation wells should be located downhole no closer than 200 feet from that portion of the boundary which abuts or corners lands for which 10-acre density has not been ordered by the Commission for the Iles and Sego Formations.

Except as previously authorized by order of the Commission, wells to be drilled under this application should 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.

Further, Whiting requests the Commission authorize the Director of the Commission, without additional notice and hearing, to grant exceptions to well locations for good cause shown (including but not limited to surface owner requests) provided a waiver is obtained from the lease owner toward whom the well location is proposed to be moved.  If a waiver cannot be obtained, Whiting requests that the well operator be authorized to apply to the Director of the Commission for a variance.

6.    On December 28, 2009, Whiting, 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 as is provided for by Rule 511.  Sworn written testimony and exhibits were submitted in support of the application.

7.    Testimony and exhibits submitted in support of the application showed that the application lands consist of one section of land surrounded by two federal units, the Freedom Unit operated by ExxonMobil Corporation and the Eureka Unit operated by EnCana Oil & Gas (USA) Inc.  Additional testimony indicated that Whiting has a 90% leasehold ownership in the application lands.

8.    Testimony and exhibits submitted in support of the application showed that the Iles and Sego Formations generally underlie the application lands and that the same depositional environment has been interpreted for the Cozzette and upper Corcoran members of the Iles Formation and for the Cameo Coal section of the Williams Fork Formation.  Additional testimony indicated that fluvial sandstone reservoirs are found both within the coastal plain section of the Corcoran and Cozzette members of the Iles Formation and within the entire Williams Fork Formation.  Further testimony indicated that within the application area, the depositional environment of the Sego Formation is marine shoreface sandstone and offshore mudstone.  Testimony showed that wells drilled to the Iles and Sego Formations appear to have drainage areas of 5 to 14 acres, and since the entry of Order No. 528-1 on October 23, 2006, further economic evaluation indicates that drilling and completing wells only in the Iles and Sego Formations is economic and does not have to be combined with the completion of the Williams Fork Formation to be economic.  Further testimony indicated that due to the heterogenous, highly discontinuous sand bodies surrounded by mudstones prevalent in the area, Iles and Sego Formation wells drilled on the application lands should be drilled on 10-acre density to efficiently drain the reservoir and avoid waste.

9.    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 gas, and will not violate correlative rights.

10.  Whiting agreed to be bound by oral order of the Commission. 

11.  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 amend Order No. 528-1 to rescind the requirement that any Iles and Sego Formation wells shall be drilled only in conjunction with the drilling of Williams Fork Formation wells for Section 3, Township 3 South, Range 97 West, 6^th P.M., for the production of gas and associated hydrocarbons from the Mesaverde Group.

ORDER

NOW, THEREFORE IT IS ORDERED, that Order No. 528-1 is hereby amended by rescinding the requirement that any Iles and Sego Formation wells shall be drilled no closer than 400 feet from the outside boundary for wells for Section 3, Township 3 South, Range 97 West, 6^th P.M. (application lands), for the production of gas and associated hydrocarbons from the Mesaverde Group.

IT IS FURTHER ORDERED, that all future Iles and Sego Formation wells drilled under this order shall be no closer than 100 feet from the outside boundary of the application lands, unless such boundary abuts or corners lands for which the Commission has not at the time of drilling permit application granted the right to drill 10-acre density Iles and Sego Formation wells, and such abutting or cornering lands are not in a federal unit that allows drilling of 10-acre density Iles and Sego Formation wells.  Where the application lands abut or corner lands for which the Commission has not at the time of drilling permit application granted the right to drill 10-acre density Iles and Sego Formation wells, and such abutting or cornering lands are not in a federal unit that allows drilling of 10-acre density Iles and Sego Formation wells, Iles and Sego Formation wells shall be located downhole no closer than 200 feet from that portion of the boundary which abuts or corners lands for which 10-acre density has not been ordered by the Commission for the Iles and Sego Formations.

IT IS FURTHER ORDERED, that Iles Formation and Sego Formation wells shall be drilled and completed only within wellbores drilled to the Williams Fork Formation and shall not be drilled as separate wells.  There shall not be more than one wellbore per 10-acre equivalent drilled under this order.

IT IS FURTHER ORDERED, that except as previously authorized by order of the Commission, wells to be drilled under this order 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 the Commission authorizes the Director of the Commission, without additional notice and hearing, to grant exceptions to well locations for good cause shown (including but not limited to surface owner requests) provided a waiver is obtained from the lease owner toward whom the well location is proposed to be moved.  If a waiver cannot be obtained, the well operator is authorized to apply to the Director of the Commission for a variance.

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 February, 2010, as of January 11, 2010.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________         

                                                                                    Carol Harmon, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

February 8, 2010