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

IN THE MATTER OF THE PROMULGATION                   )           CAUSE NO. 531

AND ESTABLISHMENT OF FIELD RULES TO               )

GOVERN OPERATIONS IN CERTAIN LANDS IN           )           ORDER NO. 531-2

JACKSON COUNTY, COLORADO                                   )

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 8:00 a.m. on July 15, 2008, in Ballroom B  of the Brown Palace Hotel, 321 Seventeenth Street, Denver, Colorado, for an order to establish approximate 640-acre drilling and spacing units and complete one horizontal well in each unit for certain lands in Townships 6 and 7 North, Ranges 80 and 81 West, 6th P.M., with the option to drill a second horizontal well, with a bottom hole location no closer than 600 feet from the boundaries of the unit, for the production of oil and associated hydrocarbons from the Niobrara Formation.

FINDINGS

The Commission finds as follows:

1.  EOG Resources, Inc. (“EOG”), 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.  Certain lands in Townships 6 and 7 North, Ranges 80 and 81 West, 6^th P.M. are subject to this Rule.

5.  On February 25, 2008, the Commission issued Order No. 531-1, which among other things, established various drilling and spacing units for the drilling and completion of one horizontal well, for certain lands in Township 6 North, Range 80 West, 6^th P.M., for production from the Niobrara Formation, with the option to drill a second horizontal well, in each of the drilling and spacing units except for within the approximate 480-acre drilling and spacing units where only well was allowed.

6.  On May 23, 2008, EOG, by its attorney, filed with the Commission a verified application for an order to extend the provisions of Order No. 531-1 to establish drilling and spacing units of approximate size and configuration as described below for production from the Niobrara Formation, for the drilling and completion of one horizontal well, with the option to drill a second horizontal well, in each of the drilling and spacing units.  The permitted well shall be located no closer than 600 feet from the unit boundary for the below-listed lands, for production of oil and associated hydrocarbons from the Niobrara Formation:

7.  On June 24, 2008, EOG, by its attorney, filed with the Commission an amendment to the application deleting Section 36, Township 7 North, Range 81 West, 6^th P.M. from the application lands.

8.  On July 2, 2008, EOG, 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 EOG is the majority leasehold owner of the Niobrara Formation in the application lands. 

10.  Testimony and exhibits submitted in support of the application showed that the Niobrara Formation is a common source of supply for oil and associated hydrocarbons underlying the application lands, that the Niobrara Formation ranges from approximately 600 feet thick on the northwest side to approximately 350 feet thick on the east side of the application lands, and that the area is structurally complex with numerous faults.

11. Testimony and exhibits submitted in support of the application showed that a horizontal well would have a drainage area of approximately 336 acres from the Niobrara Formation on the application lands.  Additional testimony showed that it is expected that the average estimated ultimate recovery (EUR) will be 250 MBO, with an average original oil-in-place of 5 MMBO.  Further testimony showed that the granting of this application will have no adverse affect on correlative rights, and that the efficient and economical drainage of the Niobrara Formation will occur by allowing one horizontal well to be drilled in each of the proposed drilling and spacing units with the option to drill a second horizontal well in each drilling and spacing unit.

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

13.  EOG Resources, Inc. agreed to be bound by oral order of the Commission. 

14.  Based on the facts stated in the verified amended application, having received no protests, and based on the Hearing Officer review of the application under Rule 511.b., the Commission should enter an order to establish approximate 640-acre drilling and spacing units and to allow one horizontal well to be completed in each unit for certain lands in Townships 6 and 7 North, Ranges 80 and 81 West, 6th P.M., with the option to drill a second horizontal well, with a bottom hole location no closer than 600 feet from the boundaries of the unit, for the production of oil and associated hydrocarbons from the Niobrara Formation.

ORDER

NOW, THEREFORE IT IS ORDERED, that the provisions of Order No. 531-1 are hereby extended to establish drilling and spacing units of approximate size and configuration as described below for production of oil and associated hydrocarbons from the Niobrara Formation:

IT IS FURTHER ORDERED, that one horizontal well may be drilled and completed in each of the established drilling and spacing units, with the option to drill a second horizontal well in each of the drilling and spacing units for production of oil and associated hydrocarbons from the Niobrara Formation.

IT IS FURTHER ORDERED, that each proposed horizontal well shall be drilled in the designated drilling and spacing unit with the initial penetration of the Niobrara Formation and an ultimate bottomhole location no closer than 600 feet from the boundaries of the drilling and spacing units.

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 July, 2008, as of July 15, 2008.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________          

                                                                                    Patricia C. Beaver, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

July 21, 2008