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

REPORT OF COMMISSION

                        This cause came on for hearing before the Commission on August 8, 2011, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to establish two (2) approximate 640-acre drilling and spacing units for Section 1, Township 9 North, Range 59 West, 6^th P.M. and Section 11, Township 9 North, Range 60 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.    Carrizo Oil & 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.    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.  Certain lands located in Townships 8 and 9 North, Ranges 58 through 60 West, 6^th P.M. are subject to this Rule for the Niobrara Formation.

5.    On June 9, 2011, Carrizo, by its attorneys, filed with the Commission a verified application (the “Application”) for an order to establish six approximate 640-acre drilling and spacing units for the below-listed 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 the wellbore for the permitted wells to be no closer than 600 feet from the unit boundaries, without exception being granted by the Director:

Township 8 North, Range 60 West, 6^th P.M.

Township 9 North, Range 58 West, 6^th P.M.

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

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

6.    On June 15, 2011, Carrizo, by its attorneys, submitted a letter withdrawing Section 20, Township 9 North, Range 58 West, 6^th P.M. from the Application.

7.    On July 25, 2011, Carrizo, by its attorneys, submitted a letter continuing Section 25, Township 8 North, Range 60 West, 6^th P.M. and Section 34, Township 9 North, Range 58 West, 6^th P.M. until the September Commission hearing, resulting in the below-listed lands (the “Application Lands”) remaining subject to the amended Application for consideration by the Commission at its August hearing:

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

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

8.    On July 27, 2011, Carrizo, by its attorneys, filed with the Commission a written request to approve the amended Application based on the merits of the amended verified Application and the supporting exhibits. Sworn written testimony and exhibits were submitted in support of the amended Application.

9.    On August 3, 2011, Carrizo, by its attorneys, filed a written letter with the Commission continuing Section 20, Township 9 North, Range 60 West, 6^th P.M. until the Commission’s September hearing.

10.  Land testimony and exhibits submitted in support of the amended Application by Jason Causey, Landman for Carrizo, showed Carrizo owns a leasehold interest in the Application Lands.

11.  Geologic testimony and exhibits submitted in support of the amended Application by Phillip Szymcek, Geologist for Carrizo, showed:  (1) the Niobrara Formation is productive in the area; (2) the Niobrara Formation is fairly uniform in thickness and is contiguous throughout the Amended Application Lands; and (3) structural position has no significant relevance in establishing Niobrara production in the Application Lands.  The average thickness of the Niobrara Formation is around 310 feet across the Application Lands. 

12.  Engineering testimony and exhibits submitted in support of the amended Application by Stephen Peters, Manager of Reservoir Engineering for Carrizo, showed that drainage areas for horizontal wells are significantly greater than that of vertical wells and the economics of Niobrara Formation development within the Application Lands are sound.

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

14.  The Application was reviewed by the Colorado Department of Public Health and Environment (“CDPHE”) pursuant to consultation provisions of Rule 306.d.  In a letter dated July 29, 2011, the CDPHE Oil & Gas Coordinator indicated that CDPHE does not believe any additional conditions of approval are necessary for approving the amended Application.

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

16.  Based on the facts stated in the amended 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 establishing two (2) approximate 640-acre drilling and spacing units for Section 1, Township 9 North, Range 59 West, 6^th P.M. and Section 11, Township 9 North, Range 60 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.

ORDER

NOW, THEREFORE IT IS ORDERED, that two (2) approximate 640-acre drilling and spacing units are hereby established for the below-listed lands, and up to two horizontal wells are hereby approved within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the wellbore for the permitted wells to be no closer than 600 feet from the unit boundaries, without exception being granted by the Director:

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

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

IT IS FURTHER ORDERED, that the Application submitted by Carrizo is continued for the below-listed lands until a future Commission hearing:

Township 8 North, Range 60 West, 6^th P.M.

Township 9 North, Range 58 West, 6^th P.M.

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

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   12^th   day of August, 2011, as of August 8, 2011.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________         

                                                                                    Robert A. Willis, Acting Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

August 12, 2011