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

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 IN THE MAMM CREEK FIELD, GARFIELD COUNTY, COLORADO

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CAUSE NO. 191

ORDER NO. 191-67

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission 9:00 a.m. on July 14, 2009 at the Hotel Colorado, in the Devereux Room, 526 Pine Street, Glenwood Springs, Colorado, for an order to pool all nonconsenting interests in the established approximate 223.578-acre drilling and spacing unit for certain lands located within the N½ of Section 18, Township 6 South, Range 92 West, 6^th P.M., for the development and operation of the Mancos Group Formation.

FINDINGS

The Commission finds as follows:

1. Antero Resources Piceance Corporation (“Antero”), 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. On November 27, 2006, the Commission issued Order No. 191-40, which among other things, established an approximate 223.578-acre drilling and spacing unit, consisting of the lands as described below, located within the N½ of Section 18, Township 6 South, Range 92 West, 6^th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations of the Mesaverde Group, and approved the equivalent of one well per 10 acres for said unit:

A parcel of land in the N½ of Section 18, Township 6 South, Range 92 West, 6^th P.M. beginning 445.03 feet South of the NE¼ NE¼ of said Section 18; thence South 00° 34’ 00" East a distance of 362.60 feet; thence South 519.00 feet; thence South 1320.00 feet; thence West 4260.91 feet; thence North 00° 04’ 16" West a distance of 2327.20 feet; thence North 70° 50’ 00" East a distance of 471.60 feet; thence South 89° 30’ 00" East a distance of 300.00; thence South 76° 42’ 00" East a distance of 1128.10 feet; thence South 89° 30’ 00" East a distance of 2085.20 feet; thence South 89° 59’ 30" East a distance of 181.30 feet; thence South 89° 58’ 00" East a distance of 150.5 feet to the point of beginning.

5. On July 23, 2007, the Commission issued Order No. 191-51, which among other things, pooled all nonconsenting interests in the established approximate 223.578-acre drilling and spacing unit within the N½ of Section 18, Township 6 South, Range 92 West, 6^th P.M., consisting of the lands as described above, for development and operation of the Williams Fork and Iles Formations.

6. On January 13, 2009, the Commission issued Order No. 191-60, which among other things, established an approximate 223.578-acre drilling and spacing unit, consisting of the lands as described above within the N½ of Section 18, Township 6 South, Range 92 West, 6^th P.M., for the production of gas and associated hydrocarbons from the Mancos Group Formation, which is comprised of the stratigraphic equivalent of the Mancos Shale, the Niobrara Formation, and the Mowry Shale, and approved the equivalent of one well per 10 acres, with the permitted well to be located no closer than 100 feet to the boundary of the unit or no closer than 400 feet from the boundary of the unit for lands not approved for 10-acre density.

7. On May 26, 2009, Antero, by its attorney, filed with the Commission a verified application to pool all nonconsenting interests in the established approximate 223.578-acre drilling and spacing unit, as described below within the N½ of Section 18, Township 6 South, Range 92 West, 6^th P.M., for the development and operation of the Mancos Group Formation:

8. On June 29, 2009, Grant Brothers Ranch, LLC (“Grant Brothers”), by its attorney, filed a protest to the application alleging that Antero had not correctly calculated Grant Brothers’ mineral interest in the drilling and spacing unit and that Antero had not tendered a reasonable offer to lease Grant Brothers’ mineral interest.

9. On July 2, 2009, a pre-hearing conference was convened to address those issues contained in the Grant Brothers’ protest which resulted in Antero correcting an error as to the Grant Brothers’ mineral interest. Consequently, on July 6, 2009, Grant Brothers, by its attorney, withdrew its protest.

10. On July 6, 2009, Antero, by its attorney, filed with the Commission a written request to approve the application based on the merits of the verified application and the supporting exhibits as is provided for by Rule 511.c. Sworn written testimony and exhibits were submitted in support of the application.

11. Testimony and exhibits submitted in support of the application showed that Antero is the majority mineral leaseholder of lands underlying the application lands. Additional testimony showed a list of all consenting and nonconsenting owners within the application lands, and demonstrated that Antero has an 83.24657% working interest in the unit and that Grant Brothers’, the sole unleased and non-participating interest owner, mineral interest comprises 16.75343% of the unit. Further testimony indicated that an offer to lease or to participate was sent to the nonconsenting owner, and that said offer was sent via US Mail, at least 30 days prior to the July 14, 2009 hearing, to the nonconsenting owner. Testimony showed that the offer to lease/participate and the Authorizations for Expenditures were fair and reasonable, and similar to those prevailing in the area, and that Antero has complied with the requirements of Rule 530.a. and §34-60-117(7)(d), C.R.S.

12. Antero Resources Piceance Corporation agreed to be bound by oral order of the Commission.

13. Based on the facts stated in the verified application, having received one protest which was withdrawn, and based on the Hearing Officer review of the application under Rule 511.c., the Commission should enter an order to pool the nonconsenting interest in the established approximate 223.578-acre drilling and spacing unit for certain lands located within the N½ of Section 18, Township 6 South, Range 92 West, 6^th P.M., for the development and operation of the Mancos Group Formation.

ORDER

NOW, THEREFORE IT IS ORDERED, that, 1. Pursuant to the provisions of §34-60-116, C.R.S., as amended, of the Oil and Gas Conservation Act of the State of Colorado, the nonconsenting interest in the established approximate 223.578-acre drilling and spacing unit, as described below within the N½ of Section 18, Township 6 South, Range 92 West, 6^th P.M., is hereby pooled, for the development and operation of the Mancos Group Formation:

2. The production obtained from the drilling and spacing unit shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within the drilling and spacing unit; each owner of an interest in the drilling and spacing unit shall be entitled to receive his/her share of the production of the well located on the drilling and spacing unit applicable to his/her interest in the drilling and spacing unit.

3. The unleased mineral owner is hereby deemed to have elected not to participate and shall therefore be deemed to be nonconsenting as to the well and be subject to the penalties as provided for by §34-60-116 (7), C.R.S.

4. The nonconsenting unleased mineral owner within the drilling and spacing unit shall be treated as the owner of the landowner's royalty to the extent of 12.5% of his/her record title interest, whatever that interest may be, until such time as the consenting owner recovers, only out of the nonconsenting owner's proportionate 87.5% share of production, the costs specified in §34-60-116 (7)(b), C.R.S. as amended. After recovery of such costs, the nonconsenting mineral owner shall then own his/her proportionate 8/8ths share of the well, surface facilities and production, and then be liable for his/her proportionate share of further costs incurred in connection with the well as if he/she had originally agreed to the drilling.

5. The operator of the well drilled on the above-described unit shall furnish the nonconsenting owner with a monthly statement of all costs incurred, together with the quantity of oil and gas produced, and the amount of proceeds realized from the sale of production during the preceding month.

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 July, 2009, as of July 14, 2009.

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

July 22, 2009