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

REPORT OF THE COMMISSION

The Commission heard this matter on March 25, 2013, at the offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon application for an order to approve two additional wells, up to a total of six horizontal wells within each of four approximate 640-acre drilling and spacing units established for Section 5, Township 10 North, Range 57 West, 6^th P.M., Section 6, Township 9 North, Range 59 West, 6^th P.M., Section 19, Township 10 North, Range 59 West, 6^th P.M., and Section 25, Township 11 North, Range 62 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 October 21, 2010, the Commission entered Order No. 421-3 which, among other things, established 83 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.  Section 25, Township 11 North, Range 62 West, 6^th P.M. is subject to this Order for the Niobrara Formation.

5.         On September 19, 2011, the Commission entered Order No. 535-75 which, among other things, established four approximate 640-acre drilling and spacing units, and approved four horizontal wells within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.  Section 6, Township 9 North, Range 59 West, 6^th P.M. is subject to this Order for the Niobrara Formation.

6.         On October 31, 2011, the Commission entered Order No. 535-90 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.  Section 19, Township 10 North, Range 59 West, 6^th P.M. is subject to this Order for the Niobrara Formation.

7.         On July 9, 2012, the Commission entered Order No 535-179 which, among other things, established six approximate 960-acre drilling and spacing units, and approved up to four horizontal wells within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.  Section 5, Township 10 North, Range 57 West, 6^th P.M. is subject to this Order for the Niobrara Formation.

8.         On December 13, 2012, Carrizo Oil and Gas, Inc. (“Carrizo” or “Applicant”), by its attorneys, filed with the Commission pursuant to §34-60-116 C.R.S., a concurrent application (“Concurrent Application”), Docket Number 1302-SP-34, for an order to vacate one approximate 960-acre drilling and spacing unit established by Order No. 535-179 for Sections 5 and 8, Township 10 North, Range 57 West, 6^th P.M. and establish an approximate 640-acre drilling and spacing unit for Section 5, Township 10 North, Range 57 West, 6^th P.M., and approve one horizontal well within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

9.         On December 13, 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 four 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 9 North, Range 59 West, 6^th P.M.

Section 6:        All                                                        (DSU #1)

Township 10 North, Range 57 West, 6^th P.M.

Section 5:        All                                                        (DSU #2)

Township 10 North, Range 59 West, 6^th P.M.

Section 19:      All                                                        (DSU #3)

Township 11 North, Range 62 West, 6^th P.M.

Section 25:      All                                                        (DSU #4)

10.       On January 28, 2013, Whiting, by its attorneys, filed with the Commission a protest to the Application.

11.       On January 31, 2013, Carrizo, by its attorneys, requested, and the Secretary of the Commission granted, a continuance to the March hearing.

12.       On March 8, 2013, Whiting, by its attorneys, withdrew the protest to the Application.

13.       On March 12, 2013, 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.

14.       Land testimony and exhibits submitted in support of the Application by Craig E. Wiest, Land Manager for Carrizo, showed the Applicant is an owner with the right to drill in the Application Lands.

15.       Geologic testimony and exhibits submitted in support of the Application by Paul Fears, DJ Basin Geologist for Carrizo, included Stratigraphic cross-sections and gross thickness isopach tests showing the Niobrara Formation is approximately 330 feet thick and to be consistent, continuous, and underlying all of the Application Lands.

16.       Engineering testimony and exhibits submitted in support of the Application by Stephen C. Peters, Manager of Reservoir Engineering for Carrizo, showed an estimated ultimate recovery (“EUR”) of 200 MBO and a drainage area estimated at 70 acres, for analogous type wells drilled by Carrizo within its Weld County operational area.  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.

17.       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.

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

19.       Based on the facts stated in the verified Application, having resolved all protests, and based on the Hearing Officer review of the Application under Rule 511., the Commission should enter an order to approve two additional wells, up to a total of six horizontal wells within each of four approximate 640-acre drilling and spacing units established for Section 5, Township 10 North, Range 57 West, 6^th P.M., Section 6, Township 9 North, Range 59 West, 6^th P.M., Section 19, Township 10 North, Range 59 West, 6^th P.M., and Section 25, Township 11 North, Range 62 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 a total of up to six horizontal wells, are hereby approved, within each of four 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 9 North, Range 59 West, 6^th P.M.

Section 6:        All                                                        (DSU #1)

Township 10 North, Range 57 West, 6^th P.M.

Section 5:        All                                                        (DSU #2)

Township 10 North, Range 59 West, 6^th P.M.

Section 19:      All                                                        (DSU #3)

Township 11 North, Range 62 West, 6^th P.M.

Section 25:      All                                                        (DSU #4)

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   5^th   day of April, 2013, as of March 25, 2013.      

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary