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

REPORT OF THE COMMISSION

The Commission heard this matter on January 7, 2013, at the Sheraton Denver Downtown Hotel, 1550 Court Place, Denver, Colorado, upon application for an order to approve up to six horizontal wells within each of eight approximate 640-acre drilling and spacing units for various sections located in Townships 7, 8 and 9 North, Ranges 59, 60 and 61 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.         Carrizo Oil and Gas, Inc. (“Carrizo” 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 February 22, 2011, the Commission issued Order No. 535-3 which, among other things, established 160 approximate 640-acre drilling and spacing units, and approved one horizontal well within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.  The following lands are subject to Order No. 535-3:

                        Township 8 North, Range 61 West, 6^th P.M.

                        Section 11:      All        (“DSU #8”)

                        Township 8 North, Range 61 West, 6^th P.M.

                        Section 12:      All        (“DSU #9”)

                        Township 8 North, Range 61 West, 6^th P.M.

                        Section 21:      All        (“DSU #12”)

                        Township 9 North, Range 60 West, 6^th P.M.

                        Section 10:      All        (“DSU #14”)

            5.         On May 16, 2011, the Commission entered Order No. 535-13 which, among other things, established 11 approximate 640-acre drilling and spacing units, and approved up to two horizontal wells within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.  The following lands are subject to Order No. 535-13:      

                        Township 7 North, Range 60 West, 6^th P.M.

                        Section 20:      All        (“DSU #7”)

            6.         On June 27, 2011, the Commission entered Order No. 535-29 which, among other things, pooled all nonconsenting interests in an approximate 640-acre drilling and spacing unit, for the development and operation of the Niobrara Formation.  The following lands are subject to Order No. 535-29:

                        Township 7 North, Range 60 West, 6^th P.M.

                        Section 20:      All        (“DSU #7”)

            7.         On June 27, 2011 the Commission issued Order No. 535-41 which, among other things, established nine approximate 640-acre drilling and spacing units, and approved up to two horizontal wells within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.  The following lands are subject to Order No. 535-41:

                        Township 7 North, Range 60 West, 6^th P.M.

                        Section 19:      All        (“DSU #11”)

                        Township 7 North, Range 60 West, 6^th P.M.

                        Section 8:        All        (“DSU #15”)

            8.         On August 8, 2011 the Commission issued Order No. 535-58 which, among other things, established two approximate 640-acre drilling and spacing units, and approved up to two horizontal wells within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.  The following lands are subject to Order No. 535-58:

                        Township 9 North, Range 59 West, 6^th P.M.

                        Section 1:        All        (“DSU #10”)

            9.         On August 8, 2011, the Commission issued Order No. 535-63 which, among other things, pooled all nonconsenting interests in an approximate 640-acre drilling and spacing unit, for the development and operation of the Niobrara Formation.  The following lands are subject to Order No. 535-63:

                        Township 9 North, Range 59 West, 6^th P.M.

                        Section 1:        All        (“DSU #10”)

            10.       On September 19, 2011, the Commission issued Order No. 535-78 which, among other things, pooled all nonconsenting interests in an approximate 640-acre drilling and spacing unit, for the development and operation of the Niobrara Formation.  The following lands are subject to Order No. 535-78:

                        Township 9 North, Range 60 West, 6^th P.M.

                        Section 10:      All        (“DSU #14”)

            11.       On September 19, 2011, the Commission issued Order No. 535-80 which, among other things, pooled all nonconsenting interests in an approximate 640-acre drilling and spacing unit, for the development and operation of the Niobrara Formation.  Section 8, Township 7 North, Range 60 West, 6^th P.M. is subject to Order No. 535-80:

                        Township 7 North, Range 60 West, 6^th P.M.

                        Section 8:        All        (“DSU #15”)

            12.       On September 19, 2011, the Commission issued Order No. 535-81 which, among other things, pooled all nonconsenting interests in an approximate 640-acre drilling and spacing unit, for the development and operation of the Niobrara Formation.  The following lands are subject to Order No. 535-81:

                        Township 7 North, Range 60 West, 6^th P.M.

                        Section 19:      All        (“DSU #11”)

            13.       On December 12, 2011, the Commission issued Order No. 535-106 which, among other things, pooled all nonconsenting interests in an approximate 640-acre drilling and spacing unit, for the development and operation of the Niobrara Formation.  The following lands are subject to Order No. 535-106:

                        Township 8 North, Range 61 West, 6^th P.M.

                        Section 11:      All        (“DSU #8”)

            14.       On January 23, 2012, the Commission issued Order No. 535-115 which, among other things, pooled all nonconsenting interests in an approximate 640-acre drilling and spacing unit, for the development and operation of the Niobrara Formation.  The following lands are subject to Order No. 535-115:

                        Township 8 North, Range 61 West, 6^th P.M.

                        Section 21:      All        (“DSU #12”)

            15.       On January 23, 2012, the Commission issued Order No. 535-127 which, among other things, pooled all nonconsenting interests in an approximate 640-acre drilling and spacing unit, for the development and operation of the Niobrara Formation.  The following lands are subject to Order No. 535-127:

                        Township 8 North, Range 61 West, 6^th P.M.

                        Section 12:      All        (“DSU #9”)

            16.       On January 23, 2012, the Commission issued Order No. 535-130 which, among other things, pooled all nonconsenting interests in the approximate 640-acre drilling and spacing unit, for the development and operation of the Niobrara Formation.  The Order further provided that Order 535-63 was affirmed and previously un-noticed owners are subject to the terms of said Order in the same manner as those noticed owners.  The following lands are subject to Order No. 535-130:

                        Township 9 North, Range 59 West, 6^th P.M.

                        Section 1:        All        (“DSU #10”)

            17.       On November 15, 2012, the Commission entered Order No. 535-215 which, among other things, approved up to two horizontal wells within an approximate 640-acre drilling and spacing unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.  The following lands are subject to Order No. 535-215:

                        Township 8 North, Range 61 West, 6^th P.M.

                        Section 11:      All        (“DSU #8”)

            18.       On November 2, 2012, Carrizo, 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 six horizontal wells within each of eight approximate 640-acre drilling and spacing units established 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 located no closer than 600 feet from the unit boundaries and no closer than 600 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

                        Township 7 North, Range 60 West, 6^th P.M.

                        Section 20:      All        (“DSU #7”)

                        Township 8 North, Range 61 West, 6^th P.M.

                        Section 11:      All        (“DSU #8”)

                        Township 8 North, Range 61 West, 6^th P.M.

                        Section 12:      All        (“DSU #9”)

                        Township 9 North, Range 59 West, 6^th P.M.

                        Section 1:        All        (“DSU #10”)

                        Township 7 North, Range 60 West, 6^th P.M.

                        Section 19:      All        (“DSU #11”)

                        Township 8 North, Range 61 West, 6^th P.M.

                        Section 21:      All        (“DSU #12”)

                        Township 9 North, Range 60 West, 6^th P.M.

                        Section 10:      All        (“DSU #14”)

                        Township 7 North, Range 60 West, 6^th P.M.

                        Section 8:        All        (“DSU #15”)

19.       On December 19, 2012, Carrizo, 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.

20.       Land testimony and exhibits submitted in support of the Application by Craig E. Wiest, Land Manager for Carrizo, showed that Carrizo has a right to drill in the Application Lands.

21.       Geologic testimony and exhibits submitted in support of the Application by Douglas Reid, Geological Manager for Carrizo, included an isopach map showing the total thickness of the Niobrara Formation underlying the Application Lands averages approximately 305 feet.  Stratigraphic cross-sections and gross thickness isopach tests show the Niobrara to be consistent, continuous, and underlying all of the Application Lands.

22.       Engineering testimony and exhibits submitted in support of the Application by Stephen C. Peters, Manager of Reservoir Engineering for Carrizo, showed that analog wells drilled by Carrizo within its Weld County operational area indicate an estimated ultimate recovery (“EUR”) of 200 MBO and a drainage area estimated at 70-acres.  Testimony further showed drainage estimates for the best 35 horizontal wells in the nearby Silo Field varied from 41 to 356-acres, with an average of 78-acres.  Testimony concluded the economics of the project were sound.

23.       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.

24.       Carrizo agreed to be bound by oral order of the Commission. 

25.       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 approve up to six horizontal wells within each of eight approximate 640-acre drilling and spacing units for various sections located in Townships 7, 8 and 9 North, Ranges 59, 60 and 61 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 six horizontal wells within each of eight approximate 640-acre drilling and spacing units established for the below-described lands, 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 600 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

                        Township 7 North, Range 60 West, 6^th P.M.

                        Section 20:      All        (“DSU #7”)

                        Township 8 North, Range 61 West, 6^th P.M.

                        Section 11:      All        (“DSU #8”)

                        Township 8 North, Range 61 West, 6^th P.M.

                        Section 12:      All        (“DSU #9”)

                        Township 9 North, Range 59 West, 6^th P.M.

                        Section 1:        All        (“DSU #10”)

                        Township 7 North, Range 60 West, 6^th P.M.

                        Section 19:      All        (“DSU #11”)

                        Township 8 North, Range 61 West, 6^th P.M.

                        Section 21:      All        (“DSU #12”)

                        Township 9 North, Range 60 West, 6^th P.M.

                        Section 10:      All        (“DSU #14”)

                        Township 7 North, Range 60 West, 6^th P.M.

                        Section 8:        All        (“DSU #15”)

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 January, 2013, as of January 7, 2013.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary