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

REPORT OF THE COMMISSION

The Commission heard this matter on July 9, 2012, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, upon application for an order to establish two approximate 640-acre drilling and spacing units and authorize up to four horizontal wells within each unit, for Section 6, Township 9 North, Range 67 West, 6^th P.M. and Section 24, Township 9 North, Range 68 West, 6^th P.M., for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations.

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. Section 6, Township 9 North, Range 67 West, 6^th P.M. and Section 24, Township 9 North, Range 68 West, 6^th P.M. are subject to Rule 318.a. for the Codell and Niobrara Formations.

5.         On May 10, 2012, Marathon, by its attorneys, filed with the Commission pursuant to § 34-60-116 C.R.S., a verified application (“Application”) for an order to establish two approximate 640-acre drilling and spacing units for the below-described lands (“Application Lands”), and authorize up to four horizontal wells within each unit, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations, with the treated interval of the wellbore to be located no closer than 600 feet from the unit boundaries and no closer than 1,200 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

Township 9 North, Range 67 West, 6^th P.M.

            Section 6:        All

            Township 9 North, Range 68 West, 6^th P.M

Section 24:      All

6.         On June 27, 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 in support of the Application by Tricia Clarke, Land Professional for Marathon, showed that the Applicant has either fully or partially leased the mineral interests in each section of the Application Lands, that the Application Lands are private fee leases and that the interested parties received notice of the Application.

8.         Geologic testimony and exhibits submitted in support of the Application by Matthew Humphreys, Advanced Senior Geologist for Marathon, showed that the Codell and Niobrara Formations underlie most of the DJ Basin in eastern Colorado.  Isopach maps of the Codell and Niobrara Formations showed total thickness of the Codell Formation ranges from 25 to 34 feet and the Niobrara Formation ranges in total thickness from 330 to 340 feet within the Application Lands.  A type log of the Codell-Niobrara Formation showed that the Niobrara consists of two members, the Smoky Hill Chalk and the Ft. Hays Limestone, with a structural dip of approximately 450 feet per mile to the east for both the Codell and Niobrara Formations within the Application Lands. A stratigraphic cross-section showed the Codell Formation and Niobrara Formation to be consistent, continuous, and underlying all the Application Lands.

9.         Engineering testimony and exhibits submitted in support of the Application by, Tara Watson, Reservoir Engineer for Marathon, showed type wells within the Application Lands demonstrated a range of estimated ultimate recovery (“EUR”) values from 40 to 472 MBO; a range of original oil-in-place (“OOIP”) from 794 to 9,446 MBO; and a drainage area ranging from 46 to 534-acres, with an average of 177-acres.  EUR and drainage estimates (which vary from 29 to 507-acres for horizontal wells) for the Silo Field were included in Applicant’s engineering analysis.  Additional testimony indicated granting the proposed spacing application will result in efficient and economic development of Application Lands. 

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 two approximate 640-acre drilling and spacing units, and authorize up to four horizontal wells within each unit, for Section 6, Township 9 North, Range 67 West, 6^th P.M. and Section 24, Township 9 North, Range 68 West, 6^th P.M., for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations.

ORDER

NOW, THEREFORE IT IS ORDERED, that two approximate 640-acre drilling and spacing units, are hereby established, for the below-described lands, and up to four horizontal wells within each unit, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations, with the treated interval of the wellbore to be located no closer than 600 feet from the unit boundaries and no closer than 1,200 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

Township 9 North, Range 67 West, 6^th P.M.

            Section 6:        All

            Township 9 North, Range 68 West, 6^th P.M

Section 24:      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   11^th  day of July, 2012, as of July 9, 2012.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

July 11, 2012