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 Niobrara and Codell Formations, Wattenberg Field, Adams COUNTY, COLORADO

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CAUSE NO. 407

DOCKET NO. 190600413

TYPE: POOLING

ORDER NO. 407-2888

REPORT OF THE COMMISSION

The Commission heard this matter on July 31, 2019, at the University of Colorado, School of Public Affairs, 1380 Lawrence Street, Second Floor Terrace Room, Denver, Colorado, upon application for an order to pool all interests within the drilling and spacing unit established by Order No. 407-2422 for the below-described lands (“Application Lands”), and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Duck Club 12W-20-01C Well (API No. 05-001-10160); the Duck Club 12W-20-02N Well (API No. 05-001-10162); the Duck Club 12W-20-03N Well (API No. 05-001-10165); the Duck Club 12W-20-04N Well (API No. 05-001-10157); the Duck Club 12W-20-05C Well (API No. 05-001-10159); the Duck Club 12W-20-06N Well (API No. 05-001-10161); the Duck Club 12W-20-07N Well (API No. 05-001-10167); the Duck Club 12W-20-08C Well (API No. 05-001-10166); the Duck Club 12W-20-09N Well (API No. 05-001-10164); the Duck Club 12W-20-10N Well (API No. 05-001-10163); the Duck Club 12W-20-11N Well (API No. 05-001-10156); and the Duck Club 12W-20-12C Well (API No. 05-001-10158) (“Wells”), for the development and operation of the Niobrara and Codell Formations:

Township 1 South, Range 66 West, 6^thP.M.

Section 10: E½

Section 11: All

Section 12: W½

FINDINGS

The Commission finds as follows:

1. Extraction Oil & Gas Inc., (Operator No. 10459) (“Extraction” 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 April 27, 1998, the Commission adopted Rule 318A, the Greater Wattenberg Area Special Well Location, Spacing and Unit Designation Rule. The Application Lands are subject to this Rule for the Niobrara and Codell Formations.

5. On April 30, 2018, the Commission entered Order No. 407-2422 which, among other things, established an approximate 1,280-acre drilling and spacing unit and approved a total of up to 12 horizontal wells within the unit for the Niobrara and Codell Formations underlying the Application Lands.

6. On March 19, 2019, which was at least 90 days before the Commission heard this matter, Extraction filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to pool all interests in the Application Lands, for the development and operation of the Niobrara and Codell Formations, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Wells.

7. The Applicant filed with the Commission a written request to approve the Application based on the merits of the Application and the supporting exhibits. Sworn written testimony and exhibits were submitted in support of the Application.

8. Land testimony and exhibits submitted in support of the Application by Philip Zaranka, Landman for Extraction, show that the Applicant owns, or has secured the consent of the owners of, more than 45% of the mineral interest to be pooled. In addition, the land testimony and exhibits show that the owners within the unit received a reasonable offer to lease or participate at least 90 days before the hearing date, that the owners to be pooled did not elect in writing to consent to the Wells within 60 days after receiving the offer to participate, and that any unleased owners had at least 60 days to review a reasonable offer to lease but either refused it or have not yet accepted it.

9. The land testimony and exhibits also demonstrate that the offers to lease were made in good faith, contained the contact information for a representative of the Applicant, and contained the Commission’s pooling brochure or a link to access it.

10. In addition, the land testimony and exhibits show that all nonconsenting interest owners were notified of the Application and received Authority for Expenditures ("AFEs"). Further testimony concluded that the AFEs sent by the Applicant to the interest owners were fair and reasonable estimates of the costs of the proposed drilling operations.

11. Land testimony showed the Applicant complied with the requirements of Rule 530 and the Act, and is entitled to the cost recovery provisions pursuant to §34-60-116(7), C.R.S., for the Wells, but did not provide testimony for any subsequent wells.

12. Granting the Application is consistent with the protection of public health, safety, welfare, the environment, and wildlife resources.

13. Extraction 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 pool all interests in the Application Lands, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Wells, for the development and operation of Niobrara and Codell Formations.

ORDER

IT IS HEREBY ORDERED:

1. Pursuant to the provisions of §34-60-116, C.R.S., all interests in the drilling and spacing unit established by Order No. 407-2422 for the Application Lands are hereby pooled, for the development and operation of the Niobrara and Codell Formations, effective as of the date the Application was filed.

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 its share of the production of the Wells located on the drilling and spacing unit applicable to its interest in the drilling and spacing unit.

3. The following working interest owner(s) did not elect to participate in the Well(s) or failed to make a timely election and are hereby deemed to be nonconsenting and subject to the penalties as provided for in §34-60-116(7), C.R.S: None.

4. Each nonconsenting working interest owner must reimburse the consenting owners for the owner’s proportionate share of the costs and risks of drilling and operating the Well(s) from the owner’s proportionate share of production, subject to non-cost bearing interests, if and to the extent that the royalty is consistent with the lease terms prevailing in the area and is not designed to avoid the recovery of costs provided for in §34-60-116(7)(b), C.R.S., until costs and penalties are recovered as set forth in §34-60-116(7), C.R.S.

5. The following unleased owner(s) did not elect to participate in the Well(s) or failed to make a timely election and are hereby deemed to be nonconsenting and subject to the penalties as provided for in §34-60-116(7), C.R.S.: 1573 Bellflower Drive LLC; 4674 Crestone Peak Street LLC; Aaron S. Werntz; Adams County; Adrienne Kristanne Korsgaard and Ronald Jeremy Thompson, as joint tenants; Alfredo F. Jimenez; Alicia Aragon-Alarcon; Amanda and Travis Barday, joint tenants; Ambrose Aubuchon and Amy Bittinger, as joint tenants; Ameera Keval; American Homes 4 Rent Properties Nine, LLC; Amy Herman; Angel Cabral and Janet Coronado, as joint tenants; Anita Brilz and Jim Cimiluca, as joint tenants; Anthony Tari and Manuela Bandres Tari, as joint tenants; Antonio Garcia; Armando and Mariam Ortega; Balboa LLC; Barry Rothman; Beth Clapper and Jeffrey Brown, as joint tenants; Bethany Lynn Mason and Joshua D. Mason, as joint tenants; Blaine A. Killip and Sonja M. Killip, as joint tenants; Blake W. Breckenridge and Valentyme S. Breckenridge, as joint tenants; BNSF Railway Company; Bobbie J. Woodman; Bonnie and Mark Fitser; Bradley Ryan McLaughlin and Hallie Kay McLaughlin, as joint tenants; Brandon P. Keeley and Mandy D. Keeley, as joint tenants; Brandon Stevn Wampler and Jessica Lynn Wampler; Brenda K. Dinges; Brian J. Cartwright and Julie L. Cartwright, as joint tenants; Brian K. Rhoton and Keri S. Rhoton, as joint tenants; Brian Starling and Brenda Starling, as joint tenants; Brian Whitney and Tabitha Whitney, as joint tenants; Bruce D. Foltz and Merlinda Foltz, as joint tenants; Bruce F. Dunn and Catharine M. Dunn, as joint tenants; Calvin W. Farmer and Lyzette N. Farmer, as joint tenants; Carl Buchanan; Carrie Jo Schara; Cassandra May and Christopher May, joint tenants; Catherine L. Ruis and Dennis K. Ruis, as joint tenants; Cerise Nehf and Victor Nehf, as joint tenants; Charla R. Horner Nickell; Charles F. Bechtold ; Cherry Blossom Spa, LLC; Cheryl Demarco; Chim Yong Chin; Christopher D. Fronk and Vickie L. Fronk, as joint tenants; Christopher David Mullins; Christopher Lines; Christopher R. Evans and Heather R. Evans, as joint tenants; Christopher Schissler and Krystyna Schissler, as joint tenants; Claire Sylvia Wickhorst; Clint R. Martinez; Corey Lee Bruce; CSH 20116-2 Borrower, LLC; Dana M. Rael-Padilla; Daniel J. Lira; Daniel J. Wagner and Roseann Wagner, as joint tenants; Daniel Joseph Valdez; Daniel L. Winn; Danielle Avalos-Saiz and Douglas Saiz, as joint tenants; Daren L. Reynolds and Jacqueline A. Reynolds, as joint tenants; Daryl B. Rozinek and Beth A. Rozinek, as joint tenants; David J. Felten and Adina Felten, as joint tenants; David K. Grenamyer; David O. Armijo and Lora M. Roepken, as joint tenants; David Pol Hackbart and Brittnee Ann Hackbart; David R. Hernbloom; David R. McWilliams and Cynthia K. McWilliams, as joint tenants; David Woodhouse; Dawn K. Simard; Dawn M. Lawson; Deborah Mihaltan; Denise F. Irwin; Dennis W. Jones and Debbie L. Jones, as joint tenants; Dominic J. Romero; Dominique Lipp and Katharine Ringdahl, as joint tenants; Donald P. Warn and Julia A. Warn, as joint tenants; Donald S. Tarnowski and Stephanie A. Tarnowski, as joint tenants; Donovan Pecorella and Alexa Pecorella, as joint tenants; Douglas A. Swink and Janon J. Swink, as joint tenants; Douglas Edward Klein ; Douglas M. Brown and Sondra L. Brown, as joint tenants; Drake Michael Martinez & Cassidy Janae Rupple; Dustin S. Rapp and Jeannette C. Rapp, as tenants in common; Dylan Uhl; Efren Garay; Elizabeth Shugart Duncan; Erik Schmaedeke and Michelle L. Metcalf, as joint tenants; Erin Jane Powell and Troy Rhea Powell, as joint tenants; Esperanza Messersmith and Darrell K. Messersmith, as joint tenants; Eusebio Reynoso Salinas; Evan Menkhus and Larin Lash, as joint tenants; Floyd J. Turney; Frank L. Torres and Maria A. Torres, as joint tenants; Frederick I. Currier II and Karen S. Currier, as joint tenants; Gabriel Robles and Velia Robles, as joint tenants; Ge Lor and Chia Lee Lor, as tenants in common; Geoffrey D. Abbey; George Francis Connell III/George Francis Connell, Jr; Glover S. Jarmin; Guan Li Liu; Haris Tuzinovic; Harvey E. Deutsch; Hector Terrazas and Navely Terrazas, as joint tenants; Holly E. Rotter, Samantha Rotter, and Patricia Ann Rotter as joint tenants; Hugh D. Nitchals and Anne M. Nitchals, as joint tenants; Jack H. Baker, Jr. and Rovonna L. Baker, as joint tenants; Jack W. Meyers; Jacob Ryan Gardunio; Jacqueline Trujillo; Jaime Merjil; James A. Korpal; James F. Ruhoff and Kori K. Ruhoff, as joint tenants; James Gillespie; James J. Medina; James Korpal; Jamie N. Paulsen and Daniel J. Paulsen, joint tenants; Jamie Valencia; Jared Etcheson; Javier D. Moreno and Priscilla N. Moreno, as joint tenants; Jayson J. Arosteguy Irrevocable Trust; Jennae S. Schlener; Jennifer L. Moore; Jennifer M. Grace; Jeremy S. Gaccetta; Jesse A. Whitlock and Beth A. Whitlock, joint tenants; Jessica Luther; Jill Bute; Joel and Julie Phifer; Joel Farkas; Joey Mora and Lorraine Mora, as joint tenants; John Dixon and Tammi Dixon, as joint tenants; John H. Reynolds and Linda D. Reynolds, as joint tenants; John J. Padilla and Marilyn L. Padilla, as joint tenants; John J. Romero and Ashley C. Romero, as joint tenants; John M. Spillane; John Parfitt; John Zucker and Katie Zucker, as joint tenants; Jon C. Ruck, Jr. and Lisa A. Ruck, as joint tenants; Jon M. LaGuardia; Jonathan J. Coreson; Jonathan Lowe and Bethany Lowe, as joint tenants; Jonathan Schwietert; Jorge Aurelio Silva-Avalos; Jorge L. Gutierrez and Olivia D. Gutierrez, as joint tenants; Jorge Velazquez Vazquez; Jose L. Rosales; Joshua and Adrian Salazar; Joshua J. & Denise S. Anderson; Joshua Jose Gonzalez and Alondra Gonzalez, as joint tenants; Joshua Joseph Monroe and Kayla Marie Monroe, as joint tenants; Joshua Marshall Cole ; Juan Munoz and Gina M. Lujan, as joint tenants; Judit Kiss and Tony L. Schilling, as joint tenants; Justin Case; Justin Kettler and Alexis Kettler, as joint tenants; Justin Quinn; Justin Robert Keller and Christina Marie Keller, as joint tenants; Karin B. Lundeen; Katherine Davidson; Kelli Klein; Kellie S. Jensen; Kelly and Calvin Moore; Kenneth R. Vasquez and Kathleen Ann Phelan, as tenants in common; Kevin E. Schenk and Vikki Schenk, as joint tenants; Kevin L. Kuper Jr.; Kimvui Thi Than; Kirk W. Kolodziej; Kjell A. Nygaard and Celita B. Nygaard, as joint tenants; Koby Wittek; Kristin C. Heilbron; Kyle W. Fournier and Joshua Richard Fournier, as joint tenants; Landon Cuesta; Lawrence B. Kunkle and Mary K. Kunkle, joint tenants ; Li Sai Liu; Liala Huda Roberts; Lilliana Hernandez; Linda Louise Pickens ; LOPEZ JOER A, LOPEZ ARLENE R; Lucinda A. Nieto; Lynette L. Muncy and Louis P. Auerbach, as joint tenants; Lynn C. Schnurr; Magdalena Keanaaina; Maria L. Hernandez and Jovany Hidrogo, as joint tenants; Maria Salazar; Mario Correa Jr.; Mario Moscoso; Marisha L. Gast; Mark T. Knorr and Tanneel K. Knorr, as joint tenants; Mark Willard and Debbie L. Willard, as joint tenants; Mats L. Larsson and Cher A. Larsson, as joint tenants; Matthew D. Harkness and Ashley Harkness, as joint tenants; Matthew Wilmes and Danille M. Wilmes, as joint tenants; Maurice R. Aranda and Paula M. Aranda, as joint tenants; Maxwell DeForest and Kelly Byerley-DeForest, as joint tenants; Meggien D. Hudak; Melvin Binstock; Melvin J. Froid and Darla J. Froid, as joint tenants; Merissa McKee; Michael A. Landauer and Tania L. Landauer, as joint tenants; Michael A. Lee; Michael R. Cagley; Michael Sowell and Veronica Sowell, as joint tenants; Michael T. Genereux; Michelle A. Angell and David S. Angell, as joint tenants; Michelle Denise Montoya; MK Property Management LLC; Monte Robbins; Nathan Tidwell and Lindsay Tidwell, as joint tenants; Nathaneil Hawpe; Nesochi Azubuike; Nicholas and Dannielle Vacanti; Nicholas B. Langdon and Misty A. Langdon, as joint tenants; Nicholas Langle; Northgate Village Homeowners Association, Inc.; Opendoor Property N LLC; Panda Trust dated March 21, 2015; Patrick Groover and Kimberly Groover, as joint tenants; Paul A. Karpel and Katherine M. Lasak, as joint tenants; Paul Rogert and Charlene M. Thomas, as joint tenants; Philip and Carrie Mitchell; Raymon Thomas Cray and Carly Elise Cray, as joint tenants; Renee Collier; Renee Damiano; Rhianon Canale ; Richard D. Foerster; Richard E. Damiano; Richard Keith Johnson and Judith Irene Johnson, as joint tenants; Richard Lippner; Richard Steffes and Timothy Steffes, as tenants in common; Robert Gross and Vincenzeo Esposito, as joint tenants; Robert P. Hosker and Bertha S. Shippy, as joint tenants; Robert Quick and Amy A. Schmitz, as joint tenants; Robert R. Duncan; Robert W. James, Jr. and Hye Jin K. James, as joint tenants; Robin Denise Bean; Rogelio Gomez-Morazan and Mireya Davila, as joint tenants; Ronald C. Stites and Barbara C. Stites, as joint tenants; S3L Holdings LLC; Samantha French; Sami Tanamly and Hoda Tanamly, as joint tenants; Saurav Dhakal and Sumina Shrestha, as tenants in common; SCHUMACHER CHRISTOPHER, SCHUMACHER ERIN; Scott D. Guthals and Vicki A. Swann, joint tenants ; Scott E. Rockwell and Kimberly A. Rockwell, as joint tenants; Sean Griffith and Stacie Griffith, joint tenants; Sean Kelly and Charyce Kelly, as joint tenants; Seth J. Major and Jennifer L. Major, as joint tenants; Shannon L. Salcido and Tammy Langeberg, as joint tenants; Shantel Claiborne; Shawn P. Caribardi and Heather Caribardi, as joint tenants; Shelah Huerta & Carlos Herrera, joint tenants; Siarra Marie Day, Deanne Kouba Day, and Scott Day, as joint tenants; Stacey Ann Whala; Stacy Arias; Steve Xiang Xiao and Sarah Rae Xiao, as joint tenants; Steven A. McFaddin and Glenda A. McFaddin, as joint tenatns; Steven G. Shoemaker; Steven Tollefson; Steven W. Brenneman and Meghan M. Brenneman, as joint tenants; SWH 2017-1 Borrower, LP; The Department of Highways, State of Colorado; The Smook Trust, dated July 24, 1986, as amended from time to time; Theodore R. Shipman; Thomas K. Barth, Jr.; Tifni Lee and Andrew Lee-Beber, as tenants in common; Tim A. Hohn; Tim Libhart, Kim Libhart, Gerald Geisert and Jorje Jette Geisert, as joint tenants; Timothy C. Graham and Erin K. Graham, as joint tenants; Timothy Chase Damour and Deanna G. Ries, as joint tenants; Timothy R. Hancock; Todd C. Zorn; Travis D. Becker and Kristina J. Becker, as joint tenants; Travis D. Wilson; Tuan Vo and Louise Vo, as joint tenants; Tyrone J. Herfel; Ulysses I. Silva Barrios and Brenda Silva, as joint tenants; United Power Inc.; Vincent F. Delmore; Vincent G. Martinez and Tressa L.Martinez, as joint tenants; Vivian I. Lind; Wattex Oil and Gas LLC; Wayne Michael Kwiat Jr. and Marta Kwiat, as joint tenants; Wendy M. Worley and Larry D. Worley, as joint tenants; Wesley Ryan Wages; William Brannen and Renee Brannen, as joint tenants; William C. Chambers and Jamee L. Allen, as joint tenants; William D. Benson and Shelley M. Benson, as joint tenants; William D. Mathis and Mary Lou O'Connell, as joint tenants; William Dominic Gioia and Dawn Gioia, as joint tenants; William E. Deford and Bonnie E. Deford, as joint tenants; and William T. Freeman.

6. Any nonconsenting unleased owner shall be deemed to have a landowner's royalty, proportionate to each owner’s record title interest, of:

a. for a gas well as defined in the Commission Regulations, 13% until the consenting owners recover, only out of each nonconsenting owner's proportionate 87% share of production, the costs specified in §34-60-116(7)(b), C.R.S.;

b. for an oil well as defined in the Commission Regulations, 16% until the consenting owners recover, only out of each nonconsenting owner's proportionate 84% share of production, the costs specified in §34-60-116(7)(b), C.R.S.

After recovery of the costs specified in §34-60-116(7)(b), C.R.S., each unleased nonconsenting mineral owner owns its proportionate 8/8ths share of the Wells, surface facilities, and production, and is liable for its proportionate share of further costs as if the nonconsenting owner had originally agreed to the drilling.

7. The operator of the Wells shall furnish the nonconsenting owners 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.

8. A nonconsenting owner is immune from liability for costs arising from spills, releases, damage, or injury resulting from oil and gas operations on the drilling and spacing unit.

9. The operator shall not use the surface owned by a nonconsenting owner without the nonconsenting owner’s permission.

10. Nothing in this order is intended to conflict with §34-60-116, C.R.S. Any conflict that may arise shall be resolved in favor of the statute.

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 6^th day of August, 2019, as of July 31, 2019

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By____________________________________

Mimi C. Larsen, Secretary