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

REPORT OF THE COMMISSION

The Commission heard this matter on January 28, 2019, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to amend an approximate 200-acre drilling and spacing unit established by Order No. 540-70 for portions of Sections 29, 30, 31, and 32, Township 6 North, Range 88 West, 6th P.M., to include the E½SW¼ of Section 29, Township 6 North, Range 88 West, 6th P.M., and one vertical, or one directional, or one horizontal well for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.

FINDINGS

The Commission finds as follows:

1. Ephphatha, LLC (Operator No. 10282) (“Ephphatha” 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, on unspaced lands, 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. Section 29, Township 6 North, Range 88 West, 6th P.M., is subject to this rule for the Niobrara Formation.

   
   

5. On September 17, 2018 (corrected October 11, 2018), the Commission entered Order No. 540-70, which among other things, established an approximate 200-acre drilling and spacing unit for portions of Sections 29, 30, 31, and 32, Township 6 North, Range 88 West, 6th P.M., with the productive interval of the wellbore to be located no closer than 600 feet from unit boundaries, no closer than 300 feet from the southern boundary of the NE¼NE¼ of Section 31, no closer than 300 feet from the eastern boundary of the NW¼SW¼ of Section 29, and no closer

   than 150 feet from the productive interval of any other wellbore located in the unit, unless the Director grants an exception.

   
   

6. On October 28, 2018, the Commission entered Order No. 540-71 540-70, which among other things, pooled all interests in an approximate 200-acre drilling and spacing unit, for the W½SW¼ of Section 29, the SE¼SE¼ of Section 30, the NE¼NE¼ of Section 31, and the NW¼NW¼ of Section 32, Township 6 North, Range 88 West, 6th P.M., for the development and operation of the Niobrara Formation, and subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Dry Creek UT HD 31 #1A (Pilot Hole) Well (API No. 05-107-06175).

   
   

7. On October 18, 2018, Ephphatha filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to amend an approximate 200-acre drilling and spacing unit established by Order No. 540-70 for portions of Sections 29, 30, 31, and 32, Township 6 North, Range 88 West, 6th P.M., to include the below described lands (“Application Lands”), and approve up to one vertical, or one directional, or one horizontal well within the unit for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation, with the productive interval of the wellbore to be located no closer than 600 feet from boundaries of the proposed unit except that it may be located no closer than 300 feet from the southern boundary of the NE¼NE¼ of Section 31 of the Application Lands, unless the Director grants an exception:

   
   

   Township 6 North, Range 88 West, 6th P.M. Section 29: E½SW¼

   
   

   The new expanded approximate 280-acre drilling and spacing unit will now include the below described lands, and one vertical, or one directional, or one horizontal well is approved for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation:

   
   

   Township 6 North, Range 88 West, 6th P.M. Section 29: W½SW¼, E½SW¼

   Section 30: SE¼SE¼

   Section 31: NE¼NE¼

   Section 32: NW¼NW¼

   
   

8. On November 20, 2018, Ephphatha, 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.

   
   

9. Land testimony and exhibits submitted in support of the Application by Cory Sullins, Manager for Ephphatha, showed that Ephphatha holds oil and gas leasehold interests and has a right to drill in the Application Lands.

   
   

10. Geologic testimony and exhibits submitted in support of the Application by Suzanne Cluff, consultant geologist for the Discovery Group, a consulting firm under contract to Ephphatha, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 1150 to 1180 feet thick, and is generally of uniform thickness throughout the Application Lands.

    
    

11. Engineering testimony and exhibits submitted in support of the Application by David Faulder, Geothermal and Petroleum Engineer on behalf of Ephphatha, showed that

    Ephphatha plans to drill a vertical, directional or horizontal well in the Niobrara Formation. In addition, the engineering testimony showed that, based on analog Niobrara Formation wells, the estimated drainage area for Niobrara Formation wells in the Application Lands is on average 13.7 acres, with a maximum drainage area of 32 acres, and an approximate 280-acre drilling and spacing unit is therefore not less than the maximum area that can be efficiently, economically, and effectively drained by one vertical, or one directional or one horizontal well in the Niobrara Formation.

    
    

12. 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.

    
    

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

    
    

14. Based on the facts stated in the 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 to amend an approximate 200-acre drilling and spacing unit established by Order No. 540-70 for portions of Sections 29, 30, 31, and 32, Township 6 North, Range 88 West, 6th P.M., to include the E½SW¼ of Section 29, Township 6 North, Range 88 West, 6th P.M., and one vertical, or one directional, or one horizontal well is approved for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.

ORDER

IT IS HEREBY ORDERED:

1. An approximate 200-acre drilling and spacing unit established by Order No. 540- 70 for portions of Sections 29, 30, 31, and 32, Township 6 North, Range 88 West, 6th P.M., is hereby amended to include the below described lands, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation:

   
   

   Township 6 North, Range 88 West, 6th P.M. Section 29: E½SW¼

   
   

2. The new expanded approximate 280-acre drilling and spacing unit now includes the below described lands, and one vertical, or one directional, or one horizontal well is approved for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation:

   
   

   Township 6 North, Range 88 West, 6th P.M. Section 29: W½SW¼, E½SW¼

   Section 30: SE¼SE¼

   Section 31: NE¼NE¼

   Section 32: NW¼NW¼

   
   

3. The productive interval of the wellbores will be located no closer than 600 feet from boundaries of the amended unit, except that it may be located no closer than 300 feet from the southern boundary of the NE¼NE¼ of Section 31 of the unit, unless the Director grants an exception.

IT IS FURTHER ORDERED:

1. The provisions contained in the above order shall become effective immediately.

   
   

2. The Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.

   
   

3. Under the State Administrative Procedure Act, the Commission considers this Order to be final agency action for purposes of judicial review within 35 days after the date this Order is mailed by the Commission.

   
   

4. An application for reconsideration by the Commission of this Order is not required prior to the filing for judicial review.

ENTERED this 27th day of February, 2019, as of January 28, 2019.

CORRECTED this 13th day of May 2019, as of January 28, 2019.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Mimi C. Larsen, Secretary