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

REPORT OF THE COMMISSION

            The Commission heard this matter on June 17, 2013, at the Two Rivers Convention Center, 159 Main Street, Grand Junction, Colorado, upon application for an order to establish an approximate 640-acre drilling and spacing unit for Section 9, Township 6 North, Range 66 West, 6^th P.M., and approve up to four horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Codell Formation.

FINDINGS

The Commission finds as follows:

1.         Bill Barrett Corporation (“BBC” 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.         On December 19, 1983, the Commission issued Order No. 407-1 (amended March 29, 2000) which, among other things, established 80-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Codell Formation, with the unit to be designated by the operator drilling the first well in the quarter section.  The permitted well shall be located in the center of either 40-acre tract within the unit with a tolerance of 200 feet in any direction.  The operator shall have the option to drill an additional well on the undrilled 40-acre tract in each 80-acre drilling and spacing unit.  Section 9, Township 6 North, Range 66 West, 6^th P.M. is subject to this Order for the Codell Formation.

5.         On February 19, 1992, the Commission issued Order No. 407-87 (amended August 20, 1993) which, among other things, established 80-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations, with the permitted well locations in accordance with the provisions of Order No. 407-1.  Section 9, Township 6 North, Range 66 West, 6^th P.M. is subject to this Order for the Codell Formation.

6.         On April 27, 1988, the Commission adopted Rule 318A which, among other things, allowed certain drilling locations to be utilized to drill or twin a well, deepen a well or recomplete a well and to commingle any or all Cretaceous Age Formations from the base of the Dakota Formation to the surface.  Rule 318A supersedes all prior Commission drilling and spacing orders affecting well location and density requirements of Greater Wattenberg Area wells.   On December 5, 2005, Rule 318A was amended, among other things, to allow interior infill and boundary wells to be drilled and wellbore spacing units to be established.  On August 8, 2011, Rule 318A was again amended, among other things, to address drilling of horizontal wells.  Section 9, Township 6 North, Range 66 West, 6^th P.M. is subject to Rule 318A for the Codell Formation.

7.         On April 3, 2013, BBC, by its attorneys, filed with the Commission pursuant to §34-60-116 C.R.S., a verified application (“Application”) for an order to establish an approximate 640-acre drilling and spacing unit for the below-described lands (“Application Lands”), and approve up to four horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Codell Formation, with the treated interval of the wellbore to be located no closer than 460 feet from the unit boundaries and no closer than 150 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

Township 6 North, Range 66 West, 6^th P.M.

Section 9:        All

Applicant will allocate and distribute proceeds from the proposed horizontal wells to the Codell Formation on a 640-acre basis.  Applicant did not request any change to the below-described existing 80-acre drilling and spacing units established by Order No. 407-87, or the established distribution of proceeds from any existing vertical Codell Formation wells, as follows:

8.         On June 4, 2013, BBC, 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 Brian Wert, Senior Landman for BBC, showed that BBC owns substantial leasehold interests in the Application Lands.

10.       Geologic testimony and exhibits submitted in support of the Application by Jason F. Brand, Petroleum Geologist for BBC, showed that the Codell Formation underlies the entirety of the Application Lands and ranges from 20 to 25 feet thick.  Further testimony showed the Codell Formation is a sequence of siltstones and sandstones and is a common source of supply.

11.       Engineering testimony and exhibits submitted in support of the Application by Mark Stouffer, Reservoir Engineering Advisor for BBC, showed that drilling and completing horizontal wells within the Codell Formation underlying the Application Lands is the most efficient and economic method of developing the resource.  Further testimony revealed the drainage area for 640-acre laterals averages approximately 101 acres per horizontal well, and by placing four horizontal wells within the proposed unit, correlative rights of adjacent mineral owners would be protected.

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.       BBC 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 establish an approximate 640-acre drilling and spacing unit for Section 9, Township 6 North, Range 66 West, 6^th P.M., and approve up to four horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Codell Formation.

ORDER

IT IS HEREBY ORDERED:

1.         An approximate 640-acre drilling and spacing unit for the below-described lands, is hereby established, and up to four horizontal wells within the unit, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Codell Formation, with the treated interval of the wellbore to be located no closer than 460 feet from the unit boundaries and no closer than 150 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

Township 6 North, Range 66 West, 6^th P.M.

Section 9:        All

2.         The proposed horizontal wells drilled to the Codell Formation shall allocate and distribute proceeds on a 640-acre basis.

            3,         Existing 80-acre drilling and spacing units established by Order No. 407-87 and the established distribution of proceeds from any of the below-described existing vertical Codell Formation wells, are unaffected by this Order:

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 30 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  8^th  day of July, 2013, as of June 17, 2013.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary