BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE PROMULGATION AND                                 )                             CAUSE NO. 7

ESTABLISHMENT OF FIELD RULES TO GOVERN                             )

OPERATIONS IN THE PADRONI WEST FIELD,                                    )                             ORDER NO. 7-3

LOGAN COUNTY, COLORADO                                                                )

REPORT OF THE COMMISSION

                        This cause came on for hearing before the Commission at 9:00 a.m. on August 15, 2005, in the Weld County Department of Planning Services Hearing Room, 918 10th Street, Greeley, Colorado on the application of Meritage Energy Partners, LLC ("Meritage Energy"), for an order to establish 20-acre drilling and spacing units for certain lands in Townships 9 and 10 North, Ranges 52 and 53 West, 6th P.M. in the Padroni West Field, with the permitted well to be located in the NW and SE of each quarter quarter section no closer than 200 feet from the boundary of the quarter quarter section where the well is located for production of oil, gas and associated hydrocarbons from the Dakota O-Sand Formation.

                        The Commission finds as follows:

                       1. Meritage Energy Partners, LLC 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.

                        4. On April 15, 1952, the Commission issued Order No. 7-1 which, among other things, established 20-acre drilling and spacing units for the production of oil and gas from the Muddy Sand, sometimes referred to as the "J" Sand Formation, for certain lands in Townships 9 and 10 North, Ranges 52 and 53 West, 6th P.M. in the Padroni West Field. On September 20, 1960, the Commission vacated Order No. 7-1 and placed the lands under the provisions of the Rules and Regulations of the Commission.

                        5. Rule 318.a. of the Rules and Regulations of the Commission requires that wells drilled in excess of two thousand five hundred (2,500) feet in depth be located not less than six hundred (600) feet from any lease line, and located not less than one thousand two hundred (1,200) feet from any other producible or drilling oil or gas well when drilling to the same common source of supply, unless authorized by order of the Commission upon hearing. The below-listed lands are subject to this Rule:

Township 9 North, Range 52 West, 6th P.M.

                    Section 6: All

                    Section 7: N N, S NE

Township 9 North, Range 53 West, 6th P.M.

                    Section 1: E E

Township 10 North, Range 52 West, 6th P.M.

Section 31: W, SE

                        6. On May 26, 2005, Meritage Energy, by its attorney, filed with the Commission a verified application for an order to establish 20-acre drilling and spacing units for the above-listed lands, with the permitted well to be located in the NW and SE of each quarter quarter section no closer than 200 feet from the boundary of the quarter quarter section where the well is located for production of oil, gas and associated hydrocarbons from the Dakota O-Sand Formation.

                        7. This matter was originally docketed for hearing in July and on June 29, 2005 Meritage Energy, by its attorney, filed with the Commission a written request to continue this matter to allow more time to gather initial production data in support of its application.

                        8. Testimony and exhibits presented at the administrative hearing showed that Meritage Energy had all of the subject lands leased, that Meritage Energy had a one hundred percent (100%) Working Interest in the subject lands, and that, except for a portion of the N of Section 7, Township 9 North, Range 52 West, 6th P.M. consisting of the Dubois lease, a voluntary pooling unit agreement was in place for all of the subject lands.

                        9. Testimony and exhibits presented at the administrative hearing showed that the O-Sand is a common source of supply in the Padroni West Field.

                        10. Testimony and exhibits presented at the administrative hearing showed that ten (10) additional wells could recover an estimated additional one million three hundred thousand (1,300,000) barrels of oil and increase the ultimate O-Sand recovery factor for the reservoir from thirty-one percent (31%) to thirty-nine percent (39%).

                        11. Testimony and exhibits presented at the administrative hearing showed that additional well density has proven that O-Sand oil remains in place and that ultimate O-Sand oil recovery can be increased with additional well density in the Padroni West Field.

                        12. Testimony and exhibits presented at the administrative hearing showed that ten (10) additional wells would have a discounted payout in four point zero nine (4.09) years.

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

      14. Meritage Energy Partners, LLC agrees to be bound by oral order of the Commission.

                        15. Based on the facts stated in the verified application, having received no protests and having been heard by the Hearing Officer who recommends approval, the Commission should enter an order approving the application.

ORDER

                        NOW, THEREFORE IT IS ORDERED, that 20-acre drilling and spacing units are hereby established for the below-listed lands, with the permitted well to be located in the NW and SE of each quarter quarter section no closer than 200 feet from the boundary of the quarter quarter section, where the well is located, for production of oil, gas and associated hydrocarbons from the Dakota O-Sand Formation:

Township 9 North, Range 52 West, 6th P.M.

                    Section 6: All

                    Section 7: N N, S NE

Township 9 North, Range 53 West, 6th P.M.

                    Section 1: E E

Township 10 North, Range 52 West, 6th P.M.

Section 31: W, SE

                        IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith.

                       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 thirty (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 day of August, 2005, as of August 15, 2005.

 

                                                                OIL AND GAS CONSERVATION COMMISSION

                                                                OF THE STATE OF COLORADO

 

                                                                By &# ________________________________________________

                                                                                                Patricia C. Beaver, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

August 29, 2005