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

REPORT OF THE COMMISSION

The Commission heard this matter on August 20, 2012, at the offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon application for an order to approve up to four wells within an established 640-acre drilling and spacing unit for Section 32, Township 9 North, Range 64 West, 6^th P.M., 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.         On June 27, 2011, the Commission entered Order No. 535-46 which, among other things, established five approximate 640-acre drilling and spacing units, and authorized one horizontal well within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the wellbore to be no closer than 600 feet from the unit boundaries, without exception being granted by the Director.  Section 32, Township 9 North, Range 64 West, 6^th P.M. is subject to this Order for the Niobrara Formation.

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 approve up to four wells within an established 640-acre drilling and spacing unit for the below-described lands (“Application Lands”), for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the wellbore to be no closer than 600 feet from the unit boundaries, without exception being granted by the Director:

Township 9 North, Range 64 West, 6^th P.M.
Section 32:    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.         On July 9, 2012, Marathon requested, and Commission Staff granted, a continuance to the August 20, 2012 hearing.

8.         Land testimony and exhibits submitted in support of the Application by Tricia Clarke, Land Professional for Marathon, showed that the Applicant has partially leased the mineral interests in the Application Lands, that the Application Lands are private fee leases and that the interested parties received notice of the Application.

9.         Geologic testimony and exhibits submitted in support of the Application by Matthew Humphreys, Advanced Senior Geologist for Marathon, showed that the Niobrara Formation underlies most of the DJ Basin in eastern Colorado, southeastern Wyoming, and western Nebraska and is composed of chalks, marls and limestones.  An isopach map of the interval from the top of the Niobrara Formation to the top of the Codell Formation showed a total thickness of the Niobrara Formation ranges from 300 feet to 320 feet within the Application Lands.   A type log of the Niobrara Formation showed it consists of two members, the Smoky Hill Chalk and the Ft. Hays Limestone, and the structural dip is approximately 40 feet per mile to the west.  A stratigraphic cross-section showed the Niobrara Formation to be consistent, continuous, and underlying all the Application Lands.

10.       Engineering testimony and exhibits submitted in support of the Application by Tara Watson, Reservoir Engineer for Marathon, showed the estimated ultimate recovery (“EUR”) from nearby type wells ranged from 40 to 472 MBO, a 5% recovery factor.  Testimony further showed the drainage area for horizontal type wells ranged from 46 to 534-acres, with an average of 177-acres.  The Silo Field, north of the Application Lands in southern Wyoming, is a major field producing from the Niobrara Formation.  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.  Testimony concluded the Application is economically viable.

11.       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.

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

13.       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 approve up to four wells within an established 640-acre drilling and spacing unit for Section 32, Township 9 North, Range 64 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

ORDER

NOW, THEREFORE IT IS ORDERED, that up to four wells within an established 640-acre drilling and spacing unit for the below-described lands, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, the treated interval of the wellbore to be located no closer than 600 feet from the unit boundaries, without exception being granted by the Director:

Township 9 North, Range 64 West, 6^th P.M.
Section 32:    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                      day of August, 2012, as of August 20, 2012.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________         

                                                                                    Robert J. Frick, Secretary

Dated: August 30, 2012