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

REPORT OF THE COMMISSION

                        The Commission heard this matter on October 1, 2012, at the Routt County Justice Center, 1955 Shield Drive, Steamboat Springs, Colorado, upon application for an order to establish an approximate 640-acre exploratory drilling and spacing unit for Section 18, Township 7 North, Range 59 West, 6^th P.M., and approve up to four 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.         Condor Energy Technology LLC (“Condor” 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 18, Township 7 North, Range 59 West, 6^th P.M. is subject to Rule 318.a. for the Niobrara Formation.

            5.         On August 1, 2012, Condor, by its attorneys, filed with the Commission pursuant to § 34-60-116 C.R.S., a verified application (“Application”) for an order to establish an approximate 640-acre exploratory drilling and spacing unit for the below-described lands (“Application Lands”), and approve up to four horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the wellbore to be located no closer than 600 feet from the unit boundaries and no closer than 150 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

                        Township 7 North, Range 59 West, 6^th P.M.

                        Section 18:      All

Applicant requested up to two well pads, with each proposed horizontal well and wellpad to be located anywhere on the surface within the unit, with no more than one wellpad located within each quarter quarter section, unless an exception is otherwise granted by the Director.

6.         On September 18, 2012, Condor, 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 Sean Fitzgerald, Contract Landman for Condor, showed Condor had a partial leasehold interest in the Application Lands, and that the lands were held in fee.

8.         Geologic Testimony and exhibits submitted in support of the Application by Cynthia L. Welch, Geoscience Manager for South Texas Reservoir Alliance, LLC as contract operator for Condor, showed the Niobrara Formation exists throughout the entire Application Lands, ranging from 240 to 265 feet thick.

9.         Engineering Testimony and exhibits submitted in support of the Application by Sean Fitzgerald, Engineering and Land Manager for South Texas Reservoir Alliance, LLC as contact operator for Condor, showed the drainage area of the best 18 nearby horizontal type wells drilled to the Niobrara Formation drained an average of 153-acres.  An economic analysis estimated ultimate recovery of 200 MBBL of oil and 300 MMCF of gas, and that the project would result in a significant increase in the recovery of hydrocarbons from the reservoir, prevent waste, protect correlative rights, and be done economically and efficiently.

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.       Condor 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 Hearings Officer review of the Application under Rule 511., the Commission should enter an order to establish an approximate 640-acre exploratory drilling and spacing unit for Section 18, Township 7 North, Range 59 West, 6^th P.M., and approve up to four horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

ORDER

            NOW, THEREFORE IT IS ORDERED, that an approximate 640-acre exploratory drilling and spacing unit for the below-described lands, is hereby established, and up to four horizontal wells within the unit, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the wellbore to be located no closer than 600 feet from the unit boundaries and no closer than 150 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

                        Township 7 North, Range 59 West, 6^th P.M.

                        Section 18:      All

                        IT IS FURTHER ORDERED, that the horizontal wells may be drilled from up to two well pads, located anywhere on the surface within the unit, subject to existing COGCC surface location rules and setbacks, with no more than one well pad located within each quarter quarter section, unless an exception is granted by the Director.

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 October, 2012, as of October 1, 2012.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary