BEFORE THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO IN THE MATTER OF THE APPLICATION OF RENEGADE OIL &GAS COMPANY, LLC FOR AN.ORDER OF THE COMMISSION INTERPRETING AND/OR REVISING ORDER 407-1277 AS NECESSARY TO PROVIDE THAT RENEGADE OIL &GAS COMPANY, LLC SHALL RECEIVE THE BENEFIT OF ITS LEASEHOLD ROYALTY AND OVERRIDING ROYALTY INTERESTS APPLICABLE TO THEIR INTEREST IN THE YOUNG 01 N-65W-28-8N WELL (API No. 05-123-40511) AND ALL OTHER ADDITIONAL WELLS DRILLED IN THE E/2 OF SECTION 28, TOWNSHIP 1 NORTH, RANGE 65 WEST, 6th P.M., WELD COUNTY, COLORADO AND TO ALL OTHER ADDITIONAL WELLS DRILLED UPON SUCH LANDS CAUSE NO: 407 DOCKET NO: VERIFIED APPLICATION COMES NOW Renegade Oil &Gas Company, LLC (Operator No. 74165) (referred to herein as "Applicant" or "Renegade"), by and through its undersigned counsel, and pursuant to C.R.S. Section 34-60-108(7), Rule 503.b.(2), and (10), and Commission Order No. 407-1277, makes application to the Oil and Gas Conservation Commission of the State of Colorado ("COGCC") for an order: 1. Declaring, clarifying, and/or revising Order 407-1277 to provide that Applicant, as a leased mineral owner/lessor who has been force pooled, is entitled to the royalty interest provided for in its oil and gas lease, instead of the statutory 12.5% mineral owner royalty, free of cost and free of the cost recovery provisions of C.R.S. 34-60-116(7). 2. Additionally, declaring, clarifying, and/or revising Order 407-1277 to provide that Applicant, as an overriding royalty interest owner in force pooled leases, is entitled to payment of its overriding royalty interests free of cost and free of the cost recovery provisions of C.R.S. 34-60-116(7). GENERAL BACKGROUND 3. Applicant owns the minerals in the following described lands: Township 1 North, Range 65 West, 6th P.M.
(the "Leased Lands") Section 28: A portion of the S/2 as more fully described in that certain Oil and Gas Lease from Merle A. Strawder and Lila P. Strawder, Lessor, to Renegade Oil &Gas Company and H & R Well Services, Inc., Lessee, recorded on July 11, 1994 at Book 1450, Page 1057, Weld County, Colorado Containing approximately 256 acres, more or less. 4. The Leased Lands were force pooled by Verdad Oil &Gas Corporation (Operator No. 10485), ("Verdad"), in part pursuant to the Commission's Order No. 407-1277, entered May 11, 2015, as of April 13, 2015, and comprising the following described lands: Township 1 North, Range 65 West, 6th P.M. Section 28: E/2 (the "Subject Lands"). Weld County, Colorado Containing 320 acres, more or less 5. The Commission adopted Rule 318A on April 27, 1998, which among other things, allowed certain drilling locations to be used to drill or twin a well, deepen a well, or recomplete a well and to commingle any or all of the Cretaceous Age Formations from the base of the Dakota Formation to the surface. Rule 318A was amended on December 5, 2005 to allow interior infill and boundary wells to be drilled and to allow wellbore spacing units to be established. Rule 318A was amended a second time on August 8, 2011 to regulate the drilling of horizontal wells, among other things. 6. On February 19, 1992, by Order No. 407-87, the Commission established 80-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Niobrara Formation underlying certain lands, including the Subject Lands. Pursuant to Rule 318A, an approximate 320-acre horizontal Wellbore Spacing Unit was designated for the production of oil, gas and associated hydrocarbons from the Niobrara Formation underlying the Subject Lands and appropriate parties were notified. 7. On or about February 23, 2015, by Oil and Gas Lease, Renegade, in its capacity as lessor, leased its minerals to Renegade, as a lessee. Said lease was recorded April 9, 2015 at Reception No. 4097490 of the real property records, Weld County, Colorado, (the "Renegade Lease"). The Renegade Lease provides for a royalty rate of 25%. 2
8. On or about February 23, 2015, by Assignment of Overriding Royalty Interest, Renegade assigned an overriding royalty to Renegade out of certain third party oil and gas leases covering the Subject Lands. Said assignment was recorded April 9, 2015 at Reception No. 4097491 of the real property records, Weld County, Colorado, (the "Renegade ORRI I"). The Renegade ORRI I is equal to the difference between existing royalties and overriding royalties and 25%. 9. On or about April 9, 2015, by Assignment of Overriding Royalty Interest, Renegade assigned an overriding royalty to Renegade out of another third party oil and gas lease covering the Subject Lands. Said assignment was recorded April 10, 2015 at Reception No. 4097943 of the real property records, Weld County, Colorado, (the "Renegade ORRI II"). The Renegade ORRI II is equal to the difference between existing royalties and overriding royalties and 25%. 10. The Commission's Order No. 407-1277 force pooling a portion of the Leased Lands with the Subject Lands is dated May 11, 2015, as of April 13, 2015 after the date the Renegade Lease and the Renegade ORRIs were recorded. 11. Order 407-1277 also provided that each "nonconsenting unleased owner" be treated as the owner of the landowner's royalty to the extent of 12.5% of its interest until such time as the consenting owners to the well recover out of their proportionate 87.5% share of production, the costs specified in 34-60-116(7)(b), C.R.S., as amended and that, after recovery of such costs, each nonconsenting unleased owner shall then own his/her proportionate share of the well, surface facilities and production, and then shall be liable for his/her proportionate share of further costs incurred in connection with the well as if he/she had originally agreed to the drilling. The order also provided that nonconsenting parties are "hereby deemed to have elected not to participate and shall therefore be deemed to be nonconsenting as to the wells) and be subject to the penalties as provided for by 34-60-116 (7)." The order further provided that the operator shall furnish all 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. 12. Verdad interprets Order 407-1277 to mean that the Applicant is entitled to only the statutory 12.5% mineral owner royalty rather than the 25% mineral owner royalty provided by the Renegade Lease, and that Renegade's ORRI's are subject to cost recovery. FORCED POOLING ISSUES 13. Any person affected by any order of the commission shall have the right at any time to apply to the commission to repeal, amend, modify, or supplement the same. C.R.S. 34-60-108(7) (2015). Order No. 407-1277 further provides that: "Nothing in this order is intended to conflict with 34-60-116, C.R.S., as amended. Any conflict that may arise shall be resolved in favor of the statute." (Order No. 407-1277, Order at 7 (under the heading of "ORDER"). The Order further states that: "The Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any 3
and/or all of the above orders." (Id. at 2 (under the heading of "IT IS FURTHER ORDERED")). 14. The Act states that leased mineral owners who are force pooled and other owners of non-cost bearing interests must be paid their royalty and overriding shares of production free of cost, and therefore, free of the risk penalty. The Act specifically provides that consenting owners are entitled to reimbursement of costs "out of, and only out of, production from the unit representing [the nonconsenting owner's] interest, excluding royalty or other interest not obligated to pay any part of the cost thereof." C.R.S. 34-60-116(7)(a) (2015). Accordingly, Renegade is entitled to be paid its royalty amount and overriding royalty amounts free of cost and free of the recovery provisions of C.R.S. 34-60-116(7). WHEREFORE, Applicant respectfully requests that this matter be set for hearing in December; 2015, that notice be given as required by law, and that upon such hearing this Commission enter its order consistent with Applicant's proposals as set forth above. DATED: October 8, 2015. By: Sc t M. Camp ell Jessica D.B. Brauer POULSON, ODELL & PETERSON, LLC 1775 Sherman Street, Suite 1400 Denver, Colorado 80203 Telephone No.: (303) 861-4400 Facsimile No.: (303) 861-1225
VE17[FTCATION STATE C3F COLORADO ) Ct)UNTY OF ARAPAHOE ) SS. J.B. Condill, of lawful age, being first duly sworn upon oath, deposes and says that he is VP-Land for Renegade Oil &Gas Company, LLC, has read the foregoing Application and that the matters therein contained are true to the best o1'his kno~~vledge, information and belief. B~': ~~~ Subscribed and s«~orn to before me this ~~^ day of ~j~~-p L~~r, 201 ~. Witness my hand and official seal. My commission expires: CsR,Q,CE 6E4911i NUi"AR'~ PUSLIC STATE C1F CGLORr4m0 NOTARY! D 201 AQfl40437 M Commission Expires Oci. 16, 2018 Notary 5
Exhibit A Verdad Oil &Gas Corporation 5950 Cedar Springs Road, Suite 200 Dallas, TX 75235 OOGC America LLC 9805 Katy Freeway, Suite 500 Houston, TX 77024 The Farmers Reservoir and Irrigation Glen A. Young Company 1952 Weld County Road #41 80 South 27th Avenue Hudson, CO 80642 Brighton, CO 80601 Michael &Renee Campbell 20962 Weld County Road 6 Hudson, CO 80642 Edward &Betty Dumph 1452 WCR #41 Hudson, CO 80642 Henrylyn Irrigation District 617 Birch Street Hudson, CO 80642 Renegade Oil &Gas Company, LLC 6155 South Main Street, Suite 210 Aurora, CO 80016 Ivar and Evelyn Jordan Family Trust P.O. Box 260845 Lakewood, CO 80226-0845
BEFORE THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO IN THE MATTER OF THE APPLICATION OF RENEGADE OIL &GAS COMPANY, LLC FOR AN ORDER OF THE COMMISSION INTERPRETING AND/OR REVISING ORDER 407-1277 AS NECESSARY TO PROVIDE THAT RENEGADE OIL &GAS COMPANY, LLC SHALL RECEIVE THE BENEFIT OF ITS LEASEHOLD ROYALTY AND OVERRIDING ROYALTY INTERESTS APPLICABLE TO THEIR INTEREST IN THE YOUNG WELL AND ALL OTHER ADDITIONAL WELLS DRILLED IN THE E/2 OF SECTION 28, TOWNSHIP 1 NORTH, RANGE 65 WEST, 6th P.M., WELD COUNTY, COLORADO AND TO ALL OTHER ADDITIONAL WELLS DRILLED UPON SUCH LANDS CAUSE NO: 407 DOCKET NO: AFFIDAVIT OF MAIL STATE OF COLORADO COUNTY OF DENVER ss. Scott M. Campbell, of lawful age, being first duly sworn upon oath, states and declares: That he is the attorney for Renegade Oil &Gas Company, LLC, Applicant herein; that on or before the 15th day of October, 2015, he caused a copy of the attached Application and Notice of Hearing to be deposited in the United States Mail, postage prepaid, addressed to each of the parties listed on Exhibit "A" to the Application. By: