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

REPORT OF THE COMMISSION

The Commission heard this matter on August 20, 2012, at the offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon application for an order to order to establish drill site and surface equipment locations in accordance with a Surface Use Plan and designated Oil and Gas Operations Areas within an approximate 6300-acre SolarReserve project lands for Sections 3, 4, 7 through 11, 15 through 18, 20 and 21, Township 41 North, Range 9 East, N.M.P.M., Saguache County, Colorado, to enable compatible surface use and oil and gas development.

FINDINGS

The Commission finds as follows:

1.         Skyline Land Company, LLC, Sam Investments, Inc., Ernest M. Myers and Virginia K. Myers, Mountain Coast Enterprises, LLC, and Wijaya Colorado, LLC (“Skyline” 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.         Rule 318.a. of the Rules and Regulations of the Oil and Gas Conservation Commission requires that 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.  Sections 3, 4, 7 through 11, 15 through 18, 20 and 21, Township 41 North, Range 9 East, N.M.P.M., Saguache County, Colorado are subject to Rule 318.a.

5.         On June 20, 2012, Skyline, by its attorneys, filed with the Commission pursuant to § 34-60-116 C.R.S., a verified application (“Application”) for an order to establish drill site and surface equipment locations in accordance with a Surface Use Plan (“SUP”) and designated Oil and Gas Operations Areas (“OGOA”) within an approximate 6300-acre SolarReserve project lands for the below-described lands (“Application Lands”) to enable compatible surface use and oil and gas development:

Township 41 North, Range 9 East, N.M.P.M., Saguache County

Section 3:      All

Section 4:      All

Section 7:      SE¼

Section 8:      All, except E½ NE¼ NE¼

Section 9:      All

Section 10:    All

Section 11:    S½ SW¼

Section 15:    NW¼

Section 16:    N½, SW¼

Section 17:    All

Section 18:    All

Section 20:    All

Section 21:    S½

Applicant requests any order establishing the requested SUP and OGOA’s remain in effect for a period of ten years from the date of the order’s entry.

6.         On August 7, 2012, Skyline, 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.         Land testimony and exhibits submitted in support of the Application by Michael D. Jones, Chief Financial Officer of Skyline for the Applicants, showed Skyline is part of the Applicant group with an interest in the Application Lands.  Additional testimony showed the SolarReserve Project Lands are under an Option Agreement with SolarReserve, and that the SolarReserve Project Lands must be free from oil and gas exploration, development, and production except for those locations within the designated OGOAs as set forth in the Application.  The Applicants obtained mineral reports to identify all mineral owners for the SolarReserve Project Lands, and notified all interested parties of the Application.

8.         General and Land testimony and exhibits submitted in support of the Application by Adam Green, Senior Development Manager of SolarReserve for Applicants, showed the nature of the project, the area that requires protection from oil and gas surface uses that could interfere with the Project and the designation of approximately 300-acres of OGOAs for the purpose of accommodating both the proposed surface use of SolarReserve Project Lands as well as accommodating potential oil and gas exploration and development.  Testimony included Exhibit “H”, Saguache County’s approval of SolarReserve’s 1041 permit for the project.  Testimony concluded the Commission’s order should remain in effect for a ten-year period to allow for financing and construction of the Project.  It is essential that compatibility of respective surface and oil and gas development of the SolarReserve Project Lands be established by order of the Commission.

9.         Geologic Testimony and exhibits submitted in support of the Application by Jewel Wellborn, Principal of Hydrocarbon Exploration & Development, Inc. for the Applicants, showed that there is no potential for commercial development of oil and gas beneath the SolarReserve Project Lands as the geological sediments in this area lack the ability to have a quality reservoir.  Additional testimony showed there is nothing to indicate that a reservoir of adequate size or continuity exists, nor is there an effective trapping mechanism underlying the area to contain any hydrocarbons.

10.       Engineering Testimony and exhibits submitted in support of the Application by A.R. (Ron) Briggs, Principal of A.R. Briggs & Associates for the Applicants, showed directional and horizontal drilling techniques provide the ability to access oil and gas reserves, if any exist, under the SolarReserve Project Lands without interference with the protected area of the solar project.  Testimony stated the protected area of the solar project is approximately 4,000 acres out of the entire project area.  The OGOAs are set aside for the oil and gas operator, with each OGOA containing a sufficient number of directional or horizontal wells, along with their attendant surface equipment and facilities, to allow for the adequate exploration, development and production of oil and gas from the protected area.  The OGOAs are of sufficient size to contain a number of well sites, as well as provide the operator flexibility in determining locations within the OGOAs to accommodate wells, access roads, pipelines, production facilities, and pipeline and flowline easements, and to do so in a manner that will not interfere with the surface use in the protected area.

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.       Skyline 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 drill site and surface equipment locations in accordance with a Surface Use Plan and designated Oil and Gas Operations Areas within an approximate 6300-acre SolarReserve project lands for Sections 3, 4, 7 through 11, 15 through 18, 20 and 21, Township 41 North, Range 9 East, N.M.P.M., Saguache County, Colorado, to enable compatible surface use and oil and gas development.

ORDER

NOW, THEREFORE IT IS ORDERED:

1)         The drill site and surface equipment locations in accordance with a Surface Use Plan and designated Oil and Gas Operating Areas within an approximate 6,300-acre approximate SolarReserve Project Lands, are hereby established, in the following lands:

Township 41 North, Range 9 East, N.M.P.M., Saguache County

Section 3:      All

Section 4:      All

Section 7:      SE¼

Section 8:      All, except E½ NE¼ NE¼

Section 9:      All

Section 10:    All

Section 11:    S½ SW¼

Section 15:    NW¼

Section 16:    N½, SW¼

Section 17:    All

Section 18:    All

Section 20:    All

Section 21:    S½;

which Oil and Gas Operating Areas are set forth in the Applicant’s Exhibit “E” attached and incorporated herein.

2)         To provide for the exploration, development, and production of oil and gas that enables compatible surface use for the Saguache County SolarReserve Project, for all oil and gas activities and operations, including the drilling of wells and the location of surface equipment and other facilities, roads, utility pipelines, flow lines, and any other easements, shall be conducted only in said Oil and Gas Operating Areas.

              3)         Any surface access for oil and gas activities and operations on the SolarReserve Project Lands be limited to lands outside the Protected Project Area, and the 5-acre parcel described in Exhibit “E”.

4)         Adoption of the Surface Use Plan will enable the contemplated surface development of solar resources while protecting the correlative rights of owners of oil and gas interests to develop oil and gas resources and thereby avoid waste in a manner consistent with the public health, safety, and welfare, and that the Surface Use Plan is adopted.

5)         Any Applications for permits to drill or for permits for locations filed with the Commission shall conform to the approved Surface Use Plan and all oil and gas surface activities and operations shall be restricted to the Oil and Gas Operating Areas.

6)         Any subsequent order entered by the Commission pursuant to §34-60-116 or its rules and regulations to establish spacing and/or well density for the SolarReserve Project Lands be deemed to include and incorporate by reference this order’s provisions.

7)         This order shall remain in effect for a period of ten years from the date hereof and be recorded in the real property records of Saguache County, Colorado. 

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

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

10)      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.

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

ENTERED this                      day of September, 2012, as of August 20, 2012.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________         

                                                                                    Robert J. Frick, Secretary