Applications, Hearings and Orders. Oh my![footnoteRef:1]Cynthia L. Bargell, Visani Bargell LLC[footnoteRef:2] [1: A paraphrase from the 1939 movie release the Wizard of Oz spoken by Dorothy to her companions when they prepared to enter the dark, forbidding forest surrounding the Yellow Brick Road on the way to Oz. Deciphering COGCC hearing documents can evoke a similar emotion in Colorado mineral estate owners. ] [2: Cindy Bargell received her degree in Mineral Land Management from the University of Colorado in 1981 and worked as a Landman for 10 years before obtaining her law degree with honors from the University of Denver in 1994. Cindy is a member of Visani Bargell LLC, and practices oil and gas and real estate law. She currently serves on the NARO Rockies Board of Directors. The information and views contained in this paper are that of the authors alone and are not intended to be representations or information made on behalf of the NARO Board. ]

Introduction.

In 2012, the Colorado Oil and Gas Conservation Commission (COGCC)[footnoteRef:3] considered approximately 147 Drilling Unit (spacing) Applications and 283 Involuntary (forced) Pooling Applications.[footnoteRef:4] Many of the Applications involved over fifty, sometimes nearly 100, different mineral interest owners. If you have not recently received an Application, I would venture a guess that by our next meeting date you may have become acquainted with the COGCC Application and hearing process.[footnoteRef:5] [3: The Colorado Oil and Gas Conservation Commission (the Commission) is the appointed body of nine individual Commissioners directed to foster the responsible, balanced development, production, and utilization of the natural resources of oil and gas in the state of Colorado in a manner consistent with protection of public health, safety, and welfare, including protection of the environment and wildlife resources as set forth in 34-60-102 (1), C.R.S. The Commission is the governing body of the agency housed in the Department of Natural Resources, initially created upon adoption of the Colorado Oil and Gas Conservation Act in 1951, 34-60-101 to 129, C.R.S. (the Act). The Director and agency staff are referred to herein as the COGCC and the Commissioners appointed in accordance with 34-60-104 C.R.S., are referred to as the Commission. ] [4: COGCC dockets hearing Applications by year, hearing month and type of application. For example 1301 UP 13 would be the 13th involuntary pooling application received in 2013 for the January hearing. Orders are then entered by field number and sequentially numbered. The November, 2012 COGCC docket (October Applications for a November Hearing) identifies the final Spacing Application as 1211 SP 147 and the final Involuntary Pooling application as 1211 UP 283. A few of the Applications likely were withdrawn along the way, but the numbers above while not an official count provide a good feel of the volume of Applications processed by the COGCC. ] [5: ]

What should you do when one of these pieces of paper shows up in your mailbox? Many mineral owners who have signed a lease figure its just a governmental regulatory matter, and file it. Others who receive the Application initially note that the matter is to be set for hearing, at some later as yet undermined date, and put the Application in the bottom of the pile. Then, when the Notice of Hearing shows up the day before any protest or intervention is due (and sometimes after the COGCC response date) the timing is such that action is all but impossible so the Application and Notice are then filed, permanently. There is of course a vague hope that the Commission is looking out for mineral owners and operators alike, after all the Commission charge is to Protect the public and private interests against waste in the production and utilization of oil and gas.[footnoteRef:6] Times are changing, however, and understanding Commission paper work is increasingly important because Commission Orders impact mineral interests for years to come. Long after the Leases have been transferred, or have even expired (and the long ago landman presumably has sold out and is enjoying a cocktail on a Bahaman beach), the mineral owner must sort out the impact of a series of Commission Orders filed long ago. [6: 34-60-101 (1) (a) (II), C.R.S. During the 2012 legislative session, several legislative proposals were advanced that would change the Commissions mission, and all but eliminate oil and gas conservation from the statutory edict of the Commission, more information on these issues to be provided during the Legislative session. ]

Changing Times

The current workload of the COGCC in processing statutory Applications[footnoteRef:7] impacting spacing and pooling is staggering. Add to that the obligation to affirmatively process several thousand APDs annually, and theres little doubt the COGCC is one of the busiest agencies in the State. Contrast the fourteen page June, 2013 COGCC docket, with over 80 matters for one hearing to the December, 2000 hearing docket with ten total matters heard, including the last of the five total involuntary pooling Applications filed for that year and the scope of current COGCC regulatory obligations take shape. Below is an unofficial Application count related to spacing and involuntary pooling. [7: Applications herein refer to adjudicatory Applications filed pursuant to Rule 507 of the COGCC Rules and Regulations. This is to distinguish the land based Applications from Applications for Permit to Drill (APD) the volume of which also has increased exponentially from 90-145 per month in 2000, to as many as the 481 APDs received in May, 2012. ]

Figure 1

Year

Hearing Application Deadline

Hearing Date

Total (Annual) Spacing Applications

Total (Annual) Involuntary Pooling Applications

2000

October

December

6

5

2001

October

December

5

7

2002

October

December

14

7

Year

Hearing Application Deadline

Hearing Date

Total (Annual) Spacing Applications

Total (Annual) Involuntary Pooling Applications

2005

October

December

17

7

2006

October

December

49

18

2007

October

December

34

24

2008

October

December

26

37

2009

October

December

24

28

2010

October

December

42

62

2011

October

December

164

171

2012

September

December

147

283

2013

Though April

June

113

131

There is little doubt a correlation exists between this workload and recently released data that Colorado oil and gas production is at a 56 year high.[footnoteRef:8] This generally is good news to both the oil and gas operator and the mineral owner alike. [8: COGCC Update April 2013 stating Colorado oil production has reached its highest level since 1957 as the COGCCs initial calculation of total oil produced in 2012 exceeds 49 million barrels. This represents a 25 percent increase over 2011 which itself saw a 20 percent increase over oil produced in 2010. ]

The increase in Applications also can be attributed to other factors including (i) the desire by operators to downsize from the traditional 40 acre drilling unit designations to allow for increased well density for tight sands on a ten acre basis (Piceance Basin) (ii) the advent of technically advanced, targeted horizontal drilling that often requires larger drilling units to ensure the lands drained by the productive lateral are attributed production from the well (iii) the COGCC processes that allow the operator to create exploratory drilling units to tie up larger blocks of land to justify exploratory operations and (iv) the often baffling splintering of mineral interests in different basins that makes locating and leasing small interests costly, and sometimes nearly impossible, increasing the appeal of involuntary pooling. The impact of these factors, and the changing regulatory environment on mineral interest owners in our State, are touched on briefly below.

Conservation Act Basics

A.The Drilling Unit. Despite the overwhelming change in the Commission work load, the statutes and rules related to spacing and involuntary pooling have remained relatively constant, with the exception of (i) the addition in 1977 of risk penalties imposed on non-consenting parties;[footnoteRef:9] (ii) the addition of obligation to offer a lease to objecting unleased mineral interest owners in a proposed pooled area[footnoteRef:10] and (iii) and the addition of exploratory drilling units added in 1991 (and discussed in Section IV. below). All involuntary pooling (and most voluntary pooling) starts with order entered by the Commission to establish the drilling unit for a proposed well, and more recently for several wells.[footnoteRef:11] The drilling unit order is commonly referred to in the industry as the spacing order.[footnoteRef:12] The math is simple - the bigger the unit the more diluted each owners share is in the pooled area. Historically, this has been viewed with disfavor by most mineral owners, and standard leases often attempt to contractually limit the size of a pooled area.[footnoteRef:13] [9: S.B. 77-113, approved June 1, 1977, establishing the recovery of 200% of the bulk of exploration costs.] [10: S.B. 88-65, approved April 4, 1984. This legislation passed primarily based on an outcry from well-organized Weld County mineral owners who increasingly experienced operators using the threat of force pooling as a way to convince the mineral interest owner they had to lease under the terms provided. Significant changes requiring an operator to offer a lease under terms no less favorable than those prevailing in the area were adopted by the General Assembly. 34-60-116(7)(d), C.R.S. ] [11: The Act, 36-60-116( 3 ), C.R.S. states (3) The order establishing drilling units shall permit only one well to be drilled and produced from the common source of supply on a drilling unit, and shall specify the location of the permitted well thereon . . . More and more frequently Spacing Orders provide for additional optional wells in the unit, often deferring to the Operator regarding the appropriate drilling operations. ] [12: The Act, 36-60-116 (6), C.R.S. states When two or more separately owned tracts are embraced within a drilling unit, or when there are separately owned interests in all or a part of the drilling unit, then persons owning such interests may pool their interests for the development and operation of the drilling unit. In the absence of voluntary pooling, the commission, upon the application of any interested person, may enter an order pooling all interests in the drilling unit for the development and operation thereof. (emphasis supplied). ] [13: The efficacy of a pooling limitation contained in a Lease is currently under fire, and the sanctioning of larger spacing units by the Commission is considered by some as creating in the operator the right to establish a statutorily pooled area, with the spacing unit involuntary pooling potentially overriding the negotiated lease terms, as discussed in Section III.B.3. ]

Unleased mineral interest owners, and operators, receive copies of the Spacing Unit Application, and Notices when a Hearing is set on the Application.[footnoteRef:14] Leased mineral owners typically are unaware their lands are being spaced.[footnoteRef:15] The Commission has taken the position that mineral interest owners, once leased, have no interest in how their lands are spaced even though spacing provides the geologic basis for further development of the mineral owners lands. [14: Notice is provided to all owners with the right to drill into and produce minerals. COGCC Rule 507 (b)(1). This definition does not include mineral interest owners who have leased their minerals. ] [15: The Commission has identified by Rule who may file an Application related to spacing and who is entitled to receive Notice of Hearings on spacing. This does not include any leased mineral owner, although a leased mineral owner may request this information contractually as part of a Lease contract. The Commissions authority to limit the parties that appear before it was recently affirmed by the District Court. ]

When the Commission receives an Application it is assigned a docket number and typically is set for the next Commission hearing. Information on all docketed matters are available on the Commission website as depicted in Figure 2 below.

Figure 2 from http://cogcc.state.co.us/

As the drilling unit establishes the basis for all later statutory pooling it is incumbent upon all mineral owners, leased and unleased alike, to monitor and understand the impact of spacing on their mineral ownership.

Mineral Owner Tip No. 1: When you receive a copy of any Application immediately go on-line to the COGCC website to determine the Hearing Date and the Protest Date associated with the Application. Do not wait for the Notice of Hearing to consider the impact the Application may have on your mineral interest.

B.Involuntary Pooling.[footnoteRef:16] In 2010, the NARO - Rockies Conference Agenda included a presentation on Involuntary Pooling that explained the involuntary pooling process.[footnoteRef:17] The substance of the paper is not reiterated here, although the process is summarized briefly below: [16: The process by which a party is included in a pooled area through the regulatory process is often referred to a Forced Pooling, or in some states Compulsory Pooling. ] [17: Michael Elliott, Forced Pooling of Oil and Gas right in Colorado: What is and how it works, a Mineral Royalty Owners View, NARO Rockies conference, September 2010. ]

Spacing does not pool, a separate involuntary pooling Application must be filed with the Commission and approved (the COGCC consent agenda process typically is used).

Pooling Applications must be provided to all mineral interest owners in the proposed pooled area, including leased mineral interests.[footnoteRef:18] [18: COGCC Rule 507 (b) (2) ; See Act, 34-60-116 (6), C.R.S.]

A Pooling Order may not be entered over protest of such [unleased] owner until the commission shall have received evidence that such unleased mineral owner shall have been tendered a reasonable offer to lease upon terms no less favorable than those currently prevailing in the area.[footnoteRef:19] [19: Act, 34-60-116(7)(d), C.R.S.]

Pooling is discretionary and any Order must be entered upon terms and conditions that are just and reasonable, and that afford to the owner of each tract or interest in the drilling unit the opportunity to recover or receive, without unnecessary expense, his just and equitable share [of production.][footnoteRef:20] [20: Act, 34-60-116 (6), C.R.S. ]

The BIG Pooling Questions:

1.Wont I be better off if I decide not to Lease?

Any unleased mineral owner or non-participating operator can elect to go nonconsent or be deemed a nonconsenting if the party fails to respond to a Authority for Expenditure (AFE) or Lease offer within thirty (30) days as required by Commission Rule 530. The Operator is entitled to recover from the nonconsenting partys share of production risk based costs including:

100% of the nonconsenting owner's share of the cost of surface equipment beyond the wellhead connections, plus

100% of the nonconsenting owner's share of the cost of operation of the well commencing with first production and continuing until the consenting owners have recovered such costs, plus

200% of the costs and expenses of staking, well site preparation, obtaining rights-of-way, rigging up, drilling, reworking, deepening or plugging back, testing, and completing the well, plus

200% of the equipment costs, including the wellhead connections.[footnoteRef:21] [21: Act, 34-60-116(7)(b) (I) & (II), C.R.S. ]

When only one well is allowed in the spacing unit the risk of going nonconsent may be easier to assess, although the decision for a mineral owner is never simple.[footnoteRef:22] When multiple wells in horizontal formations are factored in, the decision becomes exponentially more complex. While the Act provides expressly that a drilling unit may designated only one well (with the right to apply for future densities), the COGCC, especially in the context of horizontal drilling, commonly enters orders as a matter of course that allow for more than one well in a horizontal drilling unit.[footnoteRef:23] The question then arises as to the number of wells within a drilling unit that are considered nonconsent wells, where the cost recovery penalties apply. In the case of the Axia Exploratory Units, considered by the Commission at the March, 2013 Hearing, the COGCC staff, in collaboration with the Applicant, determined the nonconsent penalty would apply to the first eight (8) wells in the drilling unit, creating a considerable change in the economic analysis of any nonconsenting entity.[footnoteRef:24] [22: See n. 11 regarding the number of permissible wells per Spacing Unit. If the nonconsent penalty applies only to the first well in the Unit will the Owner then be prepared to pay its proportionate share of costs in the next wells drilled. There always is a risk that even a development well will be a dry hole, something the Owner must factor into any decision. There also is the upside of receiving the full mineral interest if costs are recovered quickly. The reality is most parties enter into a Joint Operating Agreement (JOA) to better handle the cost and risk. ] [23: See, e.g., Order 407-662, entered as of July 11, 2012, that provides for the following four approximate 640-acre drilling and spacing units, for the below-described lands, and up to four horizontal wells within each 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 boundaries of the units, without exception being granted by the Director in [location]. (Emphasis supplied). ] [24: Axia Order 540-20 entered April 5, 2013, effective March 25, 2013 in which the Commission states, IT IS FURTHER ORDERED, that the approved pooling order will pool all interests in the unit, pursuant to 34-60-116(6) C.R.S., and acknowledges that the nonconsenting parties interests in the first eight wells drilled and completed in the unit will be subject to the nonconsent penalties set forth in 34-60-116(7) C.R.S. If Applicant elects to drill more than eight wells, Applicant will notify nonconsenting parties and give them an opportunity to participate pursuant to Rule 530. (Emphasis supplied). ]

[Remainder of page intentionally blank.]

Figure 5- Horizontal Drilling in Weld County (example T7N, R63W and surrounding area) http://dnrwebmapgdev.state.co.us/mg2012app/

2.Who decides on lease terms that are reasonable and no less favorable than those prevailing in the area?

COGCC Rule 530.c. provides that:

An unleased owner shall be deemed a nonconsenting owner if, after at least thirty (30) days written notice, the unleased owner has failed or refused a reasonable offer to lease. In determining whether a reasonable offer to lease has been tendered under 34-60-116(7)(d), C.R.S., the Commission shall consider the lease terms listed below for the drilling and spacing unit in the application and for all cornering and contiguous units that are under the proposed lease:

(1) Date of lease and primary term or offer with acreage in lease;

(2) Annual rental per acre;

(3) Bonus payment or evidence of its non-availability;

(4) Mineral interest royalty; and

(5) Such other lease terms as may be relevant.[footnoteRef:25] [25: COGCC Rule 530.c.]

Accordingly, the Commission retains jurisdiction to determine lease terms that are just and reasonable, provided each party impacted by an involuntary pooling order must respond within the statutory time-frame to either participate or lease, and the party will be considered a non-consenting party.[footnoteRef:26] There are however few Commission Orders that deal with the lease terms offered when a tract is involuntarily pooled.[footnoteRef:27] [26: Act, 24-60-116(7), C.R.S.] [27: Order No. 256-10 entered August 22, 2000, outlined lease terms offered by Chesapeake to an unleased mineral owner for the Commissions consideration, including a 3 to 5 year lease term and $40/acre bonus. More recent orders only acknowledge the obligation to make a lease offer, but do not set forth specific lease terms.]

More commonly, the Involuntary Pooling applicant will certify that at least thirty (30) days prior to the hearing on [the] matter each such interest owner not already leased or voluntarily pooled will be offered the opportunity to lease, or to participate in the drilling of the authorized wells, and will be provided the information required by Rule 530.[footnoteRef:28] Any mineral owner that receives an offer to Lease or AFE needs to be aware that a response is required within the thirty (30) day period prior to the hearing, a fact not always clear from the offer letters. [28: See, e.g., Application Docketed at 1301 UP 10, Carrizo Oil and Gas Applicant at 8. ]

Mineral Owner Tip No. 2: Keep close track of the time frames within which a Lease Offer or Offer to participate is received. If a pooled party does not respond within thirty (30) days the statutory presumption is an election to go non-consent.[footnoteRef:29] [29: See Order 381-16, entered April 4, 2011, in which the Commission determined Nobles failure to timely respond to an involuntary pooling proposal resulting in Noble being ordered a nonconsenting party despite Nobles later attempts to participate in the proposed well. ]

3.My interest is leased and contains a pooling limitation, the Commission cant change my Lease, can they?

Historically, the Commission has avoided injecting itself into any private party contractual disputes. [footnoteRef:30] As a legal matter the Commission has only regulatory jurisdiction over the items specifically enumerated by statute, and accordingly is not typically in a position to adjudicate specific lease terms.[footnoteRef:31] [30: See Order No. 346-6, In the Matter of the Promulgation and Establishment of Field Rules to Govern Operations in the Spear Field, Washington County, Colorado, rescinding a prior pooling order, stating Settlement of these matters between private parties is encouraged. Order No. 342-6, 11, Aug. 11, 1994.] [31: See Order No. 1-73, 40, Oct. 21, 1997, explaining 118.5 of the Act is intended to ensure timely payment of proceeds due to payees who are legally entitled to payment, and does not create in the Commission authority to adjudicate private disputes related to the legality of specific deductions. The one exception being the consideration of lease terms offered to an unleased mineral owner pursuant to Rule 530; see supra n. 25. ]

Unlike a Spacing Application, the notice of an Application for involuntary pooling goes to every mineral interest owner.[footnoteRef:32] Applications are routinely filed asking the Commission for an Order pooling all interests, including but not limited to, any nonconsenting lease interests, in the Application Lands for the development of the Niobrara Formation by six authorized wells.[footnoteRef:33] The Commission Orders entered for Involuntary Pooling Applications typically echo the Application language.[footnoteRef:34] The question then arises whether a Commission Order entered on an Involuntary Pooling Application impacts or alters existing Lease terms that contain a pooling limitation that differs from the approved Involuntary Pooling Order. Inquiries directed at operators counsel thus far have been answered with the statement that the operator will consider the leased interest statutorily pooled for the purposes of the drilling unit, information that does not directly address the question above. [32: Supra, at n. 18.] [33: See, e.g., Application 1302 UP 40 filed on behalf of Carrizo Oil Company to pool all interests within a six hundred forty acre drilling Unit. ] [34: See, e.g., Order No. 407-778 and 525-286 in which the Order states Pursuant to the provisions of 34-60-116, C.R.S., as amended, of the Oil and Gas Conservation Act, all interests in an approximate 640-acre drilling and spacing unit established for the below-described lands, are hereby pooled, for the development and operation of the Niobrara Formation, effective as of the earlier of the date of the Application, or the date that any of the costs specified in C.R.S. 34-60-116(7)(b)(II) are first incurred for the drilling . . . . (Emphasis supplied.)]

Accordingly, it is important to recognize that Involuntary Pooling is a discretionary function of the Commission, and every involuntary pooling order shall be made after notice and hearing and shall be upon terms and conditions that are just and reasonable, and that afford to the owner of each tract or interest in the drilling unit the opportunity to recover or receive, without unnecessary expense, his just and equitable share.[footnoteRef:35] Traditionally, what is considered just and reasonable for resource allocation among the owners in a pooled area is based on a calculation, taking the amount of acreage in each of the pooled tracts and dividing it by the total acreage in the pooled area (proportionately reduced in accordance with the undivided ownership in the pooled tracts). However, if a pooling limitation is considered an inducement to execute a lease, and the lessor is relying upon the lessees compliance with the Lease terms, a mineral lessor can argue that it is not just or reasonable to use the statutory process to invoke a lease change that could not be effected directly. [35: Act, 34-60-116 (6), C.R.S. (Emphasis supplied). ]

When the impact on a leased owner is not clear, operators may argue that the lack of any objection by the leased mineral owner to the entry of the Involuntary Pooling Order is evidence that the owner has acquiesced to statutory pooling of its interest, despite any negotiated lease terms. Mineral Owners should be aware of the risk an operator may argue pooling based on the size of a unit, regardless of lease terms, if the Commission has (i) approved a drilling unit of that size and (ii) approved the Involuntary Pooling Order regardless of the Lease terms.

One relatively simple, albeit potentially costly option, to ensure lands are not statutorily pooled contrary to existing Lease terms is to request that the Commission, in the entry of an Involuntary Pooling Order, recognize that the Order does not modify the lease in question. This will require careful review and a possible response to the Application through an intervention or protest to ensure the Application does not violate the Lease terms, or that any larger pooled area is in the mineral owners best interest.

Mineral Owner Tip No. 3. When an Involuntary Pooling Application is received read your existing Lease terms to ensure the Application is consistent with the Lease language.

C.Change in Hearing Processes and Impact on Mineral Owners

To the layman the statutory provisions related to involuntary pooling may seem bewildering. While the statute has not undergone significant change in the last few years (except as identified above), the COGCC procedures for considering spacing and involuntary pooling Applications has changed dramatically. As part of the 2007 legislation that altered the focus of the Commission, the General Assembly also required the Commission to promulgate rules to establish a timely and efficient procedure for the review of applications for a permit to drill, and applications for an order establishing or amending a drilling and spacing unit. [footnoteRef:36] The Commission adopted the rules as required December 11, 2008 to take effect on April 1, 2009. [footnoteRef:37] The new Rules shift the burden of considering the statutory and geologic bases for spacing and involuntary pooling from the Commission primarily to the Commission staff. Applications that receive no protests or interventions are considered administratively by a hearing officer before the Commission hearing date, and then placed upon the Commission consent agenda. The vast majority of Applications therefore are never heard by the Commission. Instead, the Commissioners typically see the Applications presented on the Hearing Docket as shown on Figure 3. [36: H.B. 07-1341, Ch. 320 at 1357 (Colo. 2007).] [37: COGCC Rule 511 provides in part: UNCONTESTED HEARING APPLICATIONS

a. If the matter is uncontested, the applicant may request, and the Director may recommend, approval without a hearing based on review of the merits of the verified application and the supporting exhibits. If the Director does not recommend approval of the application without hearing, the applicant may request an administrative hearing on the application. For purposes of this rule anuncontested matter shall mean any application that is not subject to a protest or an interventionobjecting to the relief requested in the application and shall include matters in which all interestedparties have consented in writing to the granting of an application without a hearing.

b. Uncontested matters may be reviewed or heard administratively by a Hearing Officer andrecommended for approval on the Commissions consent agenda. ]

Figure 3

The right to full participation in a COGCC hearing is afforded only to Commission defined interested parties or to a party that successfully intervenes in the proceeding. If a mineral owner wants to voice an opinion or present testimony, whether in support or adverse to an Application, filing appropriate Commission documentation by the Protest/Intervention deadline remains an important first step.[footnoteRef:38] In addition, any individual may provide input to the Commission in the form of a Rule 510 statement. The COGCC website outlines the process for filing a 510 statement under oath, in writing, to receive proper consideration.[footnoteRef:39] [38: The Commission typically sets the protest/intervention deadline at least 10 days in advance of the scheduled hearing. Rule 509 (a)(1). By statute parties have a right to protest or intervene up to three (3) days in advance of the hearing. 34-60-108 (7), C.R.S. (Any interested party desiring to protest the granting of the petition shall, at least three days prior to the date of the hearing, file a written protest with the commission, which shall briefly state the basis of the protest.) This statutory provision may be useful when the Notice of Hearing is received after the protest deadline. ] [39: Instructions to submit a written statement under Rule 510 from http://cogcc.state.co.us/:

Submit a Rule 510 statement to the Commission by writing/typing a maximum of two (2) pages. You must include the following information and you must identify the document as a 510 Statement and verify your submission by dating, printing your name and signing the statement:

Docket Number:Full Name:Mailing Address:Phone Number:E-Mail:

Submit an original Statement and thirteen (13) copies preferably no later than 10 business days before the hearing on which this statement is being submitted. . . . In order to meet the deadline you may email a PDF to COGCC at COGCC.Hearings_Unit@state.co.us and in the subject line, type: Rule 510 Statement Docket Number ____(locate number on Notice). Check with Commission on currently required number of copies. ]

Mineral Owner Tip No. 4: Do not expect to attend a Commission Hearing with the expectation to offer testimony on any matter that is on the Consent Agenda and be able to either influence, or appeal, an adverse decision.

The Unconventional Resource Unit (a/k/a Exploratory Drilling Unit) - A Horizontal Panacea or Poltergeist?

In 1991 the General Assembly passed legislation to address the difficulties that might arise when a drilling unit cannot be appropriately defined in an exploratory setting. At the time, drilling costs had been on the rise while operators watched oil prices hover at about $20 per barrel, before continuing on a down-ward slide to all-time lows.[footnoteRef:40] The General Assembly was sympathetic to operator issues, and enacted legislation to give the COGCC authority to encourage wildcat drilling by adding the following additional language [IN ALL CAPS] to the Conservation Act: [40: See Historical Crude Oil prices, 1861 to Present, available on-line at http://chartsbin.com/view/oau. Prices hovered in the $20 range for several years and reached a (thus far) all-time low of $12.72/ barrel in 1997. As of Monday, June 10, 2013 the NYMEX West Texas Intermediate Crude Oil Price for July delivery was at $95.77 per barrel. ]

34-60-116. Drilling units and pooling interests. In establishing a drilling unit, the acreage to be embraced within each unit and the shape thereof shall be determined by the commission from the evidence introduced at the hearing, except that when found to be necessary for any of the purposes mentioned in subsection (1) of this section, the commission is authorized to divide any pool into zones and establish drilling units for each zone, which units may differ in size and shape from those established in any other zone, so that the pool as a whole will be efficiently and economically developed, but no drilling unit shall be smaller than the maximum area that can be efficiently and economically drained by one well. [A> IF THE COMMISSION IS UNABLE TO DETERMINE, BASED ON THE EVIDENCE INTRODUCED AT THE HEARING, THE EXISTENCE OF A POOL AND THE APPROPRIATE ACREAGE TO BE EMBRACED WITHIN A DRILLING UNIT AND THE SHAPE THEREOF, THE COMMISSION IS AUTHORIZED TO ESTABLISH EXPLORATORY DRILLING UNITS FOR THE PURPOSE OF OBTAINING EVIDENCE AS TO THE EXISTENCE OF A POOL AND THE APPROPRIATE SIZE AND SHAPE OF THE DRILLING UNIT TO BE APPLIED THERETO. IN ESTABLISHING THE SIZE AND SHAPE OF THE EXPLORATORY DRILLING UNIT, THE COMMISSION MAY CONSIDER, BUT IS NOT LIMITED TO, THE SIZE AND SHAPE OF DRILLING UNITS PREVIOUSLY ESTABLISHED BY THE COMMISSION FOR THE SAME FORMATION IN OTHER AREAS OF THE SAME GEOLOGIC BASIN.