BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE WILLIAMS FORK AND ILES FORMATIONS, YELLOW CREEK FIELD, RIO BLANCO COUNTY, COLORADO

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CAUSE NO. 552

DOCKET NO. 150100066

ORDER NO. 552-2

REPORT OF THE COMMISSION

The Commission heard this matter on March 2, 2015 at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to establish an approximate 323.20-acre drilling and spacing unit for Section 7, Township 1 South, Range 97 West, 6^th P.M., and approve the equivalent of up to one well per 10 acres density within the unit, for the production of oil, gas, and associated hydrocarbons from the Williams Fork and Iles Formations.

FINDINGS

The Commission finds as follows:

1. Ursa Operating Company LLC (Operator No. 10447) (“Ursa” 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 7, Township 1 South, Range 97 West, 6^th P.M., is subject to Rule 318.a. for the Williams Fork and Iles Formations.

5. On November 17, 2014, Ursa, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116 C.R.S. for an order to establish an approximate 323.20-acre drilling and spacing unit for the below-described lands (“Application Lands”) and approve the equivalent of one well per 10 acre density within the unit, for the production of oil, gas and associated hydrocarbons from the Williams Fork and Iles Formation, with the bottomhole location for any permitted well to be located anywhere upon the Application Lands, but require the productive interval of the wellbore to be located no closer than 100 feet from the unit boundaries, however, in cases where the lands abut or corner lands in respect of which the Commission has not at the time of drilling permit application granted the right to drill 10-acre density Williams Fork Formation and Iles Formation wells, the permitted well should be located downhole no closer than 200 feet from the proposed unit boundaries, without exception being granted by the Director, and with the wells be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter-quarter section (or lots or parcels approximately equivalent thereto), unless exception is granted by the Commission pursuant to an application made for such exception:

Township 1 South, Range 97 West, 6^th P.M.

Section 7: Lots 1 thru 4, and E½ W½

6. On February 9, 2015, Ursa, 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.

7. On January 15, 2015, the Bureau of Land Management (“BLM”) and Ursa reached an agreement wherein Ursa agreed to submit a Communitization Agreement (“CA”) to the BLM for any existing wells within 60 days of the entry of this order. Ursa also agreed to submit a CA to the BLM within 90 days of the date of first production (as defined by in the COGCC Rules) from the initial well within the drilling and spacing unit. The Application Lands contain leased minerals managed by BLM.

8. Land testimony and exhibits submitted in support of the Application by Jared D. McGhee, Landman for Ursa, showed that Ursa holds oil and gas leasehold interests and has a right to drill in the Application Lands.

9. Geologic testimony and exhibits submitted in support of the Application by Duke Cooley, Senior Geologist for Ursa, showed that the Williams Fork and Iles Formations are present throughout the Application Lands, are Upper Cretaceous in age, with the Williams Fork Formation being comprised of sandstones, mudstones, and coals, and the Iles Formation being comprised of primarily sandstones. The geologic testimony further showed that the thickness of productive sand deposits range from 0.5 feet to 32.5 feet, that the width ranges from 45.9 feet to 1,717 feet, that they appear to be discontinuous, and that the equivalent of one well per 10 acres well density is necessary for the development of the Williams Fork and Iles Formations.

10. Engineering testimony and exhibits submitted in support of the Application by Andrew Haney, VP of Development – Rockies, Petroleum Engineer for Ursa, gas productive interval for the Williams Fork Formation and Iles Formation wells is estimated to be 4,000 feet, and the equivalent of one well per 10 acres well density is not less than the maximum area than can be efficiently, economically and effectively drained by a well producing oil, gas and associated hydrocarbons from the Williams Fork and Iles Formations.

11. 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.

12. Ursa agreed to be bound by oral order of the Commission.

13. 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 establish an approximate 323.20-acre drilling and spacing unit for Section 7, Township 1 South, Range 97 West, 6^th P.M. and approve the equivalent of one well per 10 acre density within the unit, for the production of oil, gas and associated hydrocarbons from the Williams Fork and Iles Formation, with the bottomhole location for any permitted well to be located anywhere upon the Application Lands, but require the productive interval of the wellbore to be located no closer than 100 feet from the unit boundaries, however, in cases where the lands abut or corner lands in respect of which the Commission has not at the time of drilling permit application granted the right to drill 10-acre density Williams Fork Formation and Iles Formation wells, the permitted well should be located downhole no closer than 200 feet from the proposed unit boundaries, without exception being granted by the Director, and with the wells be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter-quarter section (or lots or parcels approximately equivalent thereto), unless exception is granted by the Commission pursuant to an application made for such exception.

ORDER

IT IS HEREBY ORDERED:

1. An approximate 323.20-acre drilling and spacing unit for the below-described lands, is hereby established, and the equivalent of one well per 10 acres within the unit, is hereby approved, for the production of oil, gas and associated hydrocarbons from the Williams Fork and Iles Formations:

Township 1 South, Range 97 West, 6th P.M.

Section 7: Lots 1 thru 4, and E½ W½

2. The bottomhole location may be located anywhere upon the unit but no closer than 100 feet from the unit boundaries, however, in cases where the lands abut or corner lands in respect of which the Commission has not at the time of drilling permit application granted the right to drill 10-acre density Williams Fork and Iles Formation wells, the permitted well shall be located downhole no closer than 200 feet from the proposed unit boundaries, without exception being granted by the Director.

3. The wells shall be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter-quarter section (or lots or parcels approximately equivalent thereto), unless exception is granted by the Commission pursuant to an application made for such exception.

4. Ursa shall submit a CA to the BLM for any existing wells within 60 days of the entry of this order. Ursa shall also submit a CA to the BLM within 90 days of the date of first production (as defined by in the COGCC Rules) from the initial well within the drilling and spacing unit.

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 18^th day of March, 2015, as of March 2, 2015.

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By__________________________________

Jill Dorancy, Acting Secretary