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

REPORT OF THE COMMISSION

            The Commission heard this matter on July 29, 2013, at offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon application for an order to vacate two approximate 641.34-acre and 626.24-acre drilling and spacing units established by Order No. 531-2 for Sections 4 and 5, Township 7 North, Range 80 West, 6^th P.M., and establish one approximate 1267.58-acre drilling and spacing unit for Sections 4 and 5, Township 7 North, Range 80 West, 6^th P.M., and approve up to seven wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

FINDINGS

The Commission finds as follows:

1.         EE3 LLC (“EE3” 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 July 15, 2008, the Commission entered Order No. 531-2 which, among other things, established drilling and spacing units for certain lands and approved up to two horizontal wells within each unit, with a bottom hole location no closer than 600 feet from the boundaries of the unit, for the production of gas and associated hydrocarbons from the Niobrara Formation. Sections 4 and 5, Township 7 North, Range 80 West, 6^th P.M. are subject to this Order for the Niobrara Formation.

5.         On March 7, 2013, EE3, by its attorneys, filed with the Commission pursuant to § 34-60-116 C.R.S., a verified application (“Application”) for an order to vacate two approximate 641.34-acre and 626.24-acre drilling and spacing units established by Order No. 531-2 for Sections 4 and 5, Township 7 North, Range 80 West, 6^th P.M., and establish one approximate 1267.58-acre drilling and spacing unit for the below-described lands (“Application Lands”), and approve up to seven wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the wellbore to be located no closer than 600 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 7 North, Range 80 West, 6^th P.M.

Section 4:        All

Section 5:        All

6.         On June 26, 2013, EE3, 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 Douglas C. Sandridge, Vice President of Land for EE3, showed EE3 owns a leasehold interest in the Application Lands, that the surface ownership is comprised of fee and Federal lands, and that the mineral ownership is comprised of fee and Federal minerals.

8.         Geologic Testimony and exhibits submitted in support of the Application by Jeffrey Dynda, Geologist for EE3, included a cross section showing the Niobrara Formation underlies and exists in a fairly uniform thickness throughout the Application Lands.

9.         Engineering Testimony and exhibits submitted in support of the Application by Andrew Ashby, Vice President of Operations for EE3, showed that nearby horizontal type wells had an estimated ultimate recovery of 126 MBOE of oil and 139 MMCF of gas, and drained an average of 169 acres per well, supporting the request for up to seven horizontal wells.

10.       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.

11.       EE3 agreed to be bound by oral order of the Commission. 

12.       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 vacate two approximate 641.34-acre and 626.24-acre drilling and spacing units established by Order No. 531-2 for Sections 4 and 5, Township 7 North, Range 80 West, 6^th P.M., and establish one approximate 1267.58-acre drilling and spacing unit for Sections 4 and 5, Township 7 North, Range 80 West, 6^th P.M., and approve up to seven wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

ORDER

IT IS HEREBY ORDERED:

1.         Two approximate 641.34-acre and 626.24-acre drilling and spacing units established by Order No. 531-2 for Sections 4 and 5, Township 7 North, Range 80 West, 6^th P.M., are hereby vacated.

2.         An approximate 1267.58-acre drilling and spacing unit for the below-described lands, is hereby established, and up to seven wells within the unit, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the wellbore to be located no closer than 600 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 7 North, Range 80 West, 6^th P.M.

Section 4:        All

Section 5:        All

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   27   day of August, 2013, as of July 29, 2013.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary