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

REPORT OF THE COMMISSION

The Commission heard this matter on March 5, 2012, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, upon application for an order to establish eight approximate 640-acre drilling and spacing units consisting of Section 36, Township 8 North, Range 59 West, 6th P.M.; Sections 4 and 28, Township 8 North, Range 64 West, 6th P.M.; Sections 20 and 28, Township 8 North, Range 65 West, 6th P.M.; Section 16, Township 8 North, Range 67 West, 6th P.M.; Section 15, Township 9 North, Range 63 West, 6th P.M.; and Section 28, Township 9 North, Range 64 West, 6th P.M., and authorize a horizontal well within each proposed unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

FINDINGS

The Commission finds as follows:

1.         Marathon Oil Company (“Marathon” 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.         Rule 318.a. of the Rules and Regulations of the Oil and Gas Conservation 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, unless authorized by order of the Commission upon hearing.  Section 36, Township 8 North, Range 59 West, 6th P.M.; Sections 4 and 28, Township 8 North, Range 64 West, 6th P.M.; Sections 20 and 28, Township 8 North, Range 65 West, 6th P.M.; Section 16, Township 8 North, Range 67 west, 6th P.M.; Section 15, Township 9 North, Range 63 West, 6th P.M.; and Section 28, Township 9 North, Range 64 West, 6th P.M. are subject to Rule 318.a. for the Niobrara Formation.

5.         On January 5, 2012, Marathon, by its attorneys, filed with the Commission a verified application (“Application”) for an order to establish eight approximate 640-acre drilling and spacing units for the below-described lands (“Application Lands”), and authorize a horizontal well within each proposed unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the permitted wellbore to be located no closer than 600 feet from the boundaries of the proposed unit, without exception being granted by the Director:

Township 8 North, Range 59 West, 6th P.M.
Section 36:                   All

Township 8 North, Range 64 West, 6th P.M.
Section 4 and 28:          All

Township 8 North, Range 65 West, 6th P.M.
Section 20 and 28:        All

Township 8 North, Range 67 West, 6th P.M.
Section 16:                   All

Township 9 North, Range 63 West, 6th P.M.
Section 15:                   All

Township 9 North, Range 64 West, 6th P.M.
Section 28:                   All

6.         On February 21, 2012, Marathon, 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 Tricia Clarke, Land Professional for Marathon, showed that Marathon has either fully or partially leased the mineral interests in each section of the Application Lands.

8.         Geologic testimony and exhibits submitted in support of the Application by Matthew Humphreys, Petroleum Geologist for Marathon, showed the total thickness of the Niobrara Formation underlying the Application Lands ranges from 260 to 360 feet.  A type log for the Niobrara Formation showed that it consists of two members, the Smoky Hill chalk and the Fort Hayes Limestone.  Further testimony indicates that the Niobrara Formation is consistent, continuous, and underlying all of the Application Lands as a common source of supply.

9.         Engineering testimony and exhibits submitted in support of the Application by Tricia Salinas, Reservoir Engineer for Marathon, indicated that analysis of the nearby Jake 2-01H Well shows an estimated 5 percent recovery factor.  The corresponding drainage area is approximately 197 acres.  Analysis of the nearby Critter Creek 04-9H Well shows an estimated 5 percent recovery factor with a corresponding drainage area of approximately 362 acres.

10.        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.

11.        Marathon agreed to be bound by oral order of the Commission. 

12.        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 establish eight approximate 640-acre drilling and spacing units consisting of Section 36, Township 8 North, Range 59 West, 6th P.M.; Sections 4 and 28, Township 8 North, Range 64 West, 6th P.M.; Sections 20 and 28, Township 8 North, Range 65 West, 6th P.M.; Section 16, Township 8 North, Range 67 West, 6th P.M.; Section 15, Township 9 North, Range 63 West, 6th P.M.; and Section 28, Township 9 North, Range 64 West, 6th P.M., and authorize a horizontal well within each proposed unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

ORDER

NOW, THEREFORE IT IS ORDERED, that eight approximate 640-acre drilling and spacing units for the below-described lands, are hereby established, and a horizontal well within each proposed unit, is hereby authorized, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the permitted wellbore to be located no closer than 600 feet from the boundaries of the proposed unit, without exception being granted by the Director:

Township 8 North, Range 59 West, 6th P.M.
Section 36:                   All

Township 8 North, Range 64 West, 6th P.M.
Section 4 and 28:          All

Township 8 North, Range 65 West, 6th P.M.
Section 20 and 28:        All

Township 8 North, Range 67 West, 6th P.M.
Section 16:                   All

Township 9 North, Range 63 West, 6th P.M.
Section 15:                   All

Township 9 North, Range 64 West, 6th P.M.
Section 28:                   All

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   8th  day of March, 2012, as of March 5, 2012.
           
                                                                        OIL AND GAS CONSERVATION COMMISSION
                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________    
                                                                                    Peter J. Gowen, Acting Secretary

Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
March 8, 2012