531-42

BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE NIOBRARA FORMATION, UNNAMED FIELD, JACKSON COUNTY, COLORADO

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CAUSE NO. 531

DOCKET NO. 161000455

TYPE: SPACING

ORDER NO. 531-42

REPORT OF THE COMMISSION

The Commission heard this matter on October 24, 2016, at the Northeastern Junior College, Hayes Student Center Ballroom, 100 College Avenue, Sterling, Colorado, upon application for an order to 1) vacate three 480-acre drilling and spacing units established by Order No. 531-1 for the N½ and SE¼ of Section 28, the N½ and SW¼ of Section 29, and the S½ and NE¼ of Section 33, all in Township 7 North, Range 80 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; and 2) establish an approximate 2,560-acre drilling and spacing unit for Sections 28, 29, 32, and 33, Township 7 North, Range 80 West, 6^th P.M. and approve up to 16 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.

FINDINGS

The Commission finds as follows:

1. SandRidge Exploration & Production LLC, Operator No. 10598 (“SandRidge” or “Applicant”) 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 Oil and Gas Conservation Commission requires that, on unspaced lands, 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.

5. On February 25, 2008, the Commission entered Order No. 531-1, which, among other things, established 480-acre drilling and spacing units for the N½ and SE¼ of Section 28, the N½ and SW¼ of Section 29, and the S½ and NE¼ of Section 33, all in Township 7 North, Range 80 West, 6th P.M., and approved the drilling of one well, with the option to drill a second well, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.

6. On August 25, 2016, amended September 16, 2016, SandRidge, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to: 1) vacate three 480-acre drilling and spacing units established by Order No. 531-1 for the N½ and SE¼ of Section 28, the N½ and SW¼ of Section 29, and the S½ and NE¼ of Section 33, all in Township 7 North, Range 80 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; and 2) establish an approximate 2,560-acre drilling and spacing unit for the below-described lands (“Application Lands”) and to approve up to 16 horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the productive interval of the wellbore to be located not less than 100 feet from the northern and southern boundaries and not less than 300 feet from the eastern and western unit boundaries, and not less than 150 feet from the treated interval of any well being drilled or producing from the Niobrara Formation, without exception being granted by the Director:

Township 7 North, Range 80 West, 6^th P.M.

Section 28: All

Section 29: All

Section 32: All

Section 33: All

7. On October 3, 2016, SandRidge, 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.

8. On October 17, 2016, SandRidge, by its attorneys, and the Bureau of Land Management (BLM) agreed that the Application Lands contain federal minerals. SandRidge agreed to submit a Communitization Agreement to the BLM at least 90 days before the anticipated date of first production (as defined in the Commission’s Rules) from the initial well drilled within the drilling and spacing unit for the Application Lands.

9. SandRidge also agreed that the Spicer 3-32H Well (API No. 05-057-06469) shall be maintained in its currently existing and communitized unit (Communitization Agreement No. COC76594), and pay only to the existing unit until such time as it is plugged and abandoned. At that time, the operator will file an application to vacate the unit for the Spicer well.

10. On October 19, 2016, the BLM filed a protest.

11. The protest was withdrawn on October 20, 2016. The withdrawal of the protest was conditioned upon the order containing a provision that the productive interval of each wellbore shall be no closer than 100 feet from the northern and southern unit boundaries and not less than 300 feet from the eastern and western unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, provided that if the Commission has not at the time of the drilling permit application granted to the owners of the adjacent or cornering lands the right to locate the treated interval of the wellbore no closer than 100 feet from the northern and southern boundaries of the unit, then the treated interval of the wellbore shall be located no closer than 215 feet from the northern and southern boundaries of the unit, unless the Director grants an exception.

12. Land testimony and exhibits submitted in support of the Application by Richard Silman, Senior Landman for SandRidge, showed that SandRidge holds oil and gas leasehold interests and has a right to drill in the Application Lands.

13. Geologic testimony and exhibits submitted in support of the Application by Scott Cherry, Geologist for SandRidge, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 440 feet thick, and is generally of uniform thickness throughout the Application Lands.

14. Engineering testimony and exhibits submitted in support of the Application by Wesley K. McAlister, Petroleum Engineer for SandRidge, showed that the drainage area for analog horizontal Niobrara Formation wells are estimated at 40.26 acres, and an approximate 2,560-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by a horizontal well producing oil, gas and associated hydrocarbons from the Niobrara Formation.

15. Applicant stated that the Buffalo Ditch 1-32H Well (API No. 05-057-06463) and Buffalo Ditch 2-32H Well (API No. 05-057-06464) will be plugged and abandoned. Once these wells are plugged and abandoned, the 640-acre unit established by Order 531-1 for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation will be vacated.

16. Applicant stated that the productive interval of the wellbore for any new horizontal well will be located not less than 300 feet from the treated interval of the Spicer 3-32H Well.

17. Applicant stated that the proposed wells would be located on no more than four multi-well pads, unless the Director grants an exception.

18. 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.

19. SandRidge agreed to be bound by oral order of the Commission.

20. Based on the facts stated in the verified Application, the protest having been withdrawn, and based on the Hearing Officer review of the Application under Rule 511, the Commission should enter an order to: 1) vacate three 480-acre drilling and spacing units established by Order No. 531-1 for the N½ and SE¼ of Section 28, the N½ and SW¼ of Section 29, and the S½ and NE¼ of Section 33, all in Township 7 North, Range 80 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; and 2) establish an approximate 2,560-acre drilling and spacing unit for Sections 28, 29, 32, and 33, Township 7 North, Range 80 West, 6^th P.M. and approve up to 16 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.

ORDER

IT IS HEREBY ORDERED:

1. Three 480-acre drilling and spacing units established by Order No. 531-1 for the N½ and SE¼ of Section 28, the N½ and SW¼ of Section 29, and the S½ and NE¼ of Section 33, all in Township 7 North, Range 80 West, 6th P.M. are hereby vacated, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

2. The Buffalo Ditch 1-32H Well (API No. 05-057-06463) and Buffalo Ditch 2-32H Well (API No. 05-057-06464) shall be plugged and abandoned. Once these wells are plugged and abandoned, the 640-acre unit established by Order 531-1 for the production of oil, gas and associated hydrocarbons from Niobrara Formation shall be vacated.

3. The Spicer 3-32H Well (API No. 05-057-06469) shall be maintained in its currently existing and communitized unit (Communitization Agreement No. COC76594), and pay only to the existing unit until such time as it is plugged and abandoned. At that time, the operator will file an application to vacate the unit for the Spicer well.

4. An approximate 2,560-acre drilling and spacing unit for the below-described lands, is hereby established, and a total of up to 16 horizontal wells within the unit are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation:

Township 7 North, Range 80 West, 6^th P.M.

Section 28: All

Section 29: All

Section 32: All

Section 33: All

5. The productive interval of each wellbore shall be no closer than 100 feet from the northern and southern unit boundaries and not less than 300 feet from the eastern and western unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, provided that if the Commission has not at the time of the drilling permit application granted to the owners of the adjacent or cornering lands the right to locate the treated interval of the wellbore no closer than 100 feet from the northern and southern boundaries of the unit, then the treated interval of the wellbore shall be located no closer than 215 feet from the northern and southern boundaries of the unit, unless the Director grants an exception.

6. The productive interval of the wellbore for any new horizontal well will be located not less than 300 feet from the treated interval of the Spicer 3-32H Well.

7. Any new horizontal wells shall be drilled in a north-south orientation.

8. SandRidge shall also submit a Communitization Agreement to the BLM at least 90 days before the anticipated date of first production (as defined in the Commission’s Rules) from the initial well drilled within the drilling and spacing unit.

9. The proposed wells shall be located on no more than four multi-well pads, unless the Director grants an exception.

IT IS FURTHER ORDERED:

1. The provisions contained in the above order shall become effective immediately.

2. The Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.

3. Under the State Administrative Procedure Act, the Commission considers this Order to be final agency action for purposes of judicial review within 35 days after the date this Order is mailed by the Commission.

4. An application for reconsideration by the Commission of this Order is not required prior to the filing for judicial review.

ENTERED this 8th day of November, 2016, as of October 24, 2016.

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By__________________________________

Julie Murphy, Secretary