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

REPORT OF THE COMMISSION

            The Commission heard this matter on May 6, 2013, at the Weld County Southwest Services Complex, 4209 Weld County Road 24 ½, Longmont, Colorado, upon application for an order to establish two approximate 640-acre drilling and spacing units for Sections 26 and 33, Township 4 South, Range 64 West, 6^th P.M. and approve up to two horizontal wells within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

FINDINGS

The Commission finds as follows:

1.            ConocoPhillips Company ("ConocoPhillips" or “Applicant”), 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.  Sections 26 and 33, Township 4 South, Range 64 West, 6^th P.M. are subject to this Rule for the Niobrara Formation.

5.            On January 21, 2013, ConocoPhillips, by its attorneys, filed with the Commission pursuant to §34-60-116 C.R.S., a verified application (“Application”) for an order to establish five approximate 640-acre drilling and spacing units for the below-described lands (“Application Lands”), and approve up to two horizontal wells within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of such wells in the Niobrara Formation no closer than 460 feet from the boundaries of the spacing unit, and no closer than 920 feet from the treated interval in another well producing from the same source of supply, without exception being granted by the Director:

Township 4 South, Range 64 West, 6^th P.M.

Section 20:      All

Section 26:      All

Section 27:      All

Section 28:      All

Section 33:      All

Applicant requests that the proposed spacing units and well location rules established by the requested order apply to the drilling and production of horizontal wells only, with vertical and directional wells drilled to the Niobrara Formation remaining subject to Rule 318.a.

6.            On March 11, 2013, Renegade Oil and Gas Company LLC (“Renegade or “Protestant”) filed a protest only as to Sections 20, 27 and 28, Township 4 South, Range 64 West, 6^th P.M. of the Application Lands.

7.            On April 5, 2013, ConocoPhillips, by its attorneys, filed a Motion to Bifurcate the unprotested lands in Sections 26 and 33, Township 4 South, Range 64 West, 6^th P.M.  Renegade had no objection to the relief requested in the Motion, provided that the failure of Renegade to protest the Application with respect to Sections 26 and 33, the non-objection of Renegade to the Motion to Bifurcate, nor the Commission entry of an order approving the Application as to Sections 26 and 33 would prejudice Renegade in the determination of its Protest with respect to Sections 20, 27 and 28 of the Application Lands.  

8.            On April 16, 2013, ConocoPhillips, by its attorneys, filed with the Commission a written Request for Approval of the Application as to Sections 26 and 33 of the Application Lands, based on its merits of the verified application and the supporting exhibits.  Sworn written testimony and exhibits were submitted in support of the Application.

9.             Land testimony and exhibits submitted in support of the Application by Carson Buckles, Landman for ConocoPhillips, showed that ConocoPhillips holds a mineral leasehold interest in Sections 26 and 33 of the Application Lands.

10.          Geologic testimony and exhibits submitted in support of the Application by Dennis P. Holler, Senior Geological Associate for MHA Petroleum Consultants for ConocoPhillips, showed that the Niobrara Formation exists under Sections 26 and 33 of the Application Lands. Additional testimony showed that the total thickness of the Niobrara Formation under the Application Lands is approximate 300 feet thick.

11.          Engineering testimony and exhibits submitted in support of the Application by John Seidle, Vice-President of MHA Petroleum Consultants, LLC for ConocoPhillips, showed the estimated ultimate recovery from analogous horizontal wells in the Niobrara Formation within the Application Lands is 271 MBO.  Additional testimony showed that the calculated drainage area based on horizontal wells in the Niobrara Formation is expected to be approximately 261-acres, with a recovery factor of 5%.  If a second well is drilled, the total area from both wells in the offset section was calculated to be approximately 522-acres. Testimony concluded the economics of the project are sound.

12.          The above-referenced testimony and exhibits show that the granting of the Application will allow more efficient reservoir drainage, and will prevent waste, will assure a greater ultimate recovery of hydrocarbons and will not violate correlative rights.

13.          ConocoPhillips has agreed to be bound by the oral order of the Commission. 

14.          Based on the facts stated in the Application, having received no protests, and based on the Hearing Officer review under Rule 511, the Commission should enter an order to establish two approximate 640-acre drilling and spacing units for Sections 26 and 33, Township 4 South, Range 64 West, 6^th P.M. and approve up to two 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 two approximate 640-acre drilling and spacing units for the below-described lands, is hereby established, and up to two 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 such wells in the Niobrara Formation no closer than 460 feet from the boundaries of the spacing unit, and no closer than 920 feet from the treated interval in another well producing from the same source of supply, without exception being granted by the Director:

Township 4 South, Range 64 West, 6^th P.M.

Section 26:      All

Section 33:      All

            IT IS FURTHER ORDERED, the proposed spacing units and well location rules established apply to the drilling and production of horizontal wells only, with vertical and directional wells drilled to the Niobrara Formation remaining subject to Rule 318.a.

IT IS FURTHER ORDERED, 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 Procedures Act, the Commission considers this order to be final agency action for purposes of judicial review within thirty (30) days after the date of 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 May, 2013, as of May 6, 2013.

OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO

By__________________________________

            Robert J. Frick, Secretary