BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOM A NEWFIELD EXPLORATION MID -CONTINENT INC.

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1 I r 02/o q/r I 514 I0- BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOM A APPLICANT : RELIEF SOUGHT : NEWFIELD EXPLORATION MID -CONTINENT INC. UNITIZED MANAGEMENT OPERATION AND FURTHER DEVELOPMENT OF THE WOODFORD UNIT 1, INCLUDING SECONDARY RECOVERY OPERATION S CAUSE CD NO T/O LEGAL DESCRIPTION : SECTIONS 1, 2 A ND 5 THROUGH 23 AND SECTIONS 27 THROUGH 32, TOWNSHIP 2 NORTH, RANGE 11 EAST, COAL COU NTY, OKLAHOMA ORDER OF THE COMMISSIO N This Cause came on for hearing before Michael L. Decker, Adm inistrative Law Judge for the Corporation Commission of Oklahoma, on the 8th day of September, 2009, regarding the Motions to Dism iss of Apache Corporation and Panhand le Oil & Gas, Inc., et al ; and on the 16th and 17th days of December, 2009, 14th and 15 th days of January, 4th and 5 th days of Februa ry, 31s' day of March, 1st day of April, and 6 th day of May, 2010, regarding the Application and those Motions to Dismiss. The hearings were conducted at 9 : 30 a. m. in the Commission 's Cou rtroom, Jim Thorpe Building, Oklahoma City, Oklahoma, pursuant to notice given as required by law and the rules of the Commission, for the purpose of taking testimony and repo rting to the Commission. At the time of the hearing on the Motions to Dismiss, and later at the time of the hearings on the Applicat ion (and the reasse rted Motions), Gregory L. Mahaffey, attorney, appeared for the Applicant, Newfield Explorat ion Mid-Continent, Inc. (Newfield) ; R ichard A. Grimes, attorney, appeared for the Protestant/Movant, Apache Corporation (Apache) ; Richard K. Books, attorneys, appeared for the Protestants/Movants, Panhandle Oil & Gas, Inc,. (Panhandle), and Farmers Royalty Co. (Farmers), and appeared for interested parties, XTO Energy, Inc., and Chesapeake Energy Corp. Lee I. Levinson, attorney, appeared for the Protestants/Movants, Milam Sons Minerals, Steveco Trust, Phillip Viles, Judge Clay Mowdy, Marie Production Co., Michael Levinson, and Kenny Joe Smith (Milan Sons et al) ; John R. Reeves, attorney, appeared for BP America Production Co. (BP), which pa rty initially protested this matter but subsequently w ithdrew that protest, and interested pa rties Antero Resources Page -1-

2 NEWFIELD EXPLORATION MID -CONTINENT, INC. Corporation and Red Oak Energy Pa rtners, LLC ; J. Fred G ist, attorney, appeared for Sinclair Oil & Gas Co. ; Michael D. Stack, attorney, appeared for interested pa rties Samson Resources Co. and Canaan Resources, LLC ; Benjamin F. Hackett, attorney, appeared pro se ; Robert A. Miller, attorney, appeared in suppo rt of the Motions to Dismiss for Sedna Energy Co. ; David Pepper, attorney, appeared for interested parties, Devon Energy Production Co. LP and Continental Resources, Inc. ; Ronald M. Barnes, attorney, appeared for interested party, Cimarex Energy Co. ; Charles L. Helm, attorney, appeared for interested party, JMA Energy Co., LLC ; written appearances were filed by Valerie Michelle Evans, attorney, who appeared for Ronald McDonald ; Lou Ann Moudy, attorney, who appeared for the M. A. Viersen Revocable Trust ; Keith Thomas, Assistant General Counsel, Sally Shipley, Deputy General Counsel, Jim Hamilton, Assistant General Counsel, and Ben Jackson, Commission Counsel, appeared for the Oil and Gas Conservation Division, Oklahoma Corporation Commission (Commission) ; and Mason Mungle, Linda Huff, Stanley Dana, and Russell Miller appeared pro se. At the time of the appeal of the Mot ions to Dismiss to the Oil and Gas Appellate Referee Patricia D. MacGuigan, on October 20,. 2009, Gregory L. Mahaffey, attorney, appeared on behalf of Applicant, Newfield ; Richard A. Grimes, attorney, appeared on behalf of the Movant, Apache ; Lee I. Levinson, attorney, appeared on behalf of the Movants, Milam Sons et al.; Richard K. Books, attorney, appeared on behalf of the Movants, Panhandle and Farmers, and behalf of interested pa rties, XTO Energy, Inc. and Chesapeake Energy Corp. ; John R. Reeves, attorney, appeared on behalf of BP, Antero Resources Corporation and Red Oak Energy Partners, LLC ; Robert A. Miller, attorney, on behalf of Sedna Energy Co. ; Michael D. Stack, attorney, appeared on behalf of Samson Resources Co. and Canaan Resources, LLC ; David E. Pepper, attorney, appeared for Devon Energy Production Co., L. P. and Continental Resources, Inc. ; Ronald M. Barnes, attorney, appeared on behalf of Cimarex Energy Co. ; Charles L. Helm, attorney, appeared on behalf of JMA Energy Co., L.L.C. ; J. Fred Gist, attorney, appeared on behalf of Sinclair Oil & Gas Co. ; Benjamin F. Hackett, attorney, appeared pro se ; Jeffrey C. Baum, attorney, appeared for the Estate of Steua rt Hare ; Mason Mungle, appeared pro se and for the Rebekah Mungle Trust ; Joe O ' Br ien appeared pro se ; and, Keith Thomas, Sally Shipley, and Ben Jackson appeared on behalf of the Oil and Gas Conservation Division, Oklahoma Corporation Commission. On the 16 '" day of December, 2009, appearances were entered at the commencement of the evidentia ry hearing for previously indicated pa rties from attorneys Gregory L. Mahaffey, Richard A. Grimes, Richard K. Books, John R. Reeves, Lee I. Levinson, J. Fred Gist, Michael D. Stack, and Ben F. Hackett. Commission Counsel Ben Jackson, Deputy General Counsel Sally Shipley, and Assistant General Counsels Keith Thomas and Jim Ham ilton appeared for the Oil and Gas Conservatio n Page -2-

3 NEWFIELD EXPLORATION MID- CONTINENT, INC. Division. These attorneys participated in the hearings on the 15 th day of Janua ry, 4 th and 5'h days of February, 31 St day of March, 1 St day of April, and the 6th day of May, An appeal to the Report of the Administrative Law Judge was filed on behalf of Newfield. That appeal was heard by the Oil and Gas Appellate Referee Patricia D. MacGuigan on October 20, The same appearances were entered as described above. The Oil and Gas Appellate Referee issued her Repo rt on November 19, 2009 recommending that the appeal be dismissed as moot. The Commission En Banc deliberated this cause on October 12, 2010 and voted 3-0 to grant the Motion to Dism iss by Apache Corporation. The Commission found that the relief sought by th is Application does not meet the requ i rements of 52 Okla. Stat et seq. The reports of the Administrative Law Judge and Oil and Gas Referee are incorporated by reference herein. FINDING S 1. Newfield Exploration Mid-Continent, Inc., filed Cause CD No on June 30, 2009, seeking a Commission order approving the unitized management of the Woodford, Mississipp ian, and Hunton common sources of supply underlying Sections 1, 2, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 27, 28, 29, 30, 31, and 32, in Township 2 No rth, Range 11 East, Coal County, Oklahoma, LESS AND EXCEPT wells completed in the subject common sources of supply as of the effective date of the field-wide unit designated the Woodford Unit On August 21, 2009, a Scheduling Order, Order , was issued by the Commission. The venue for this cause was changed from Tulsa to Oklahoma City by Order No , issued on September 22, Pursuant to said order, Motions to Dismiss, were filed on August 31 and September 1, 2009, by Apache and Panhandle on September 3, 2009 by Milam Sons et al. A response was filed on behalf of Newfield. The Motions to Dismiss were presented on the Oklahoma City Motion Docket September 8, 2009, and were taken under advisement. 4. The Oral Report of the Administrative Law Judge in Response to Respondents ' Motion to Dismiss was filed on September 23, 2009, which recommended that the Appl icant be granted an evidentia ry hearing to determine : (A.) If the Commission has statuto ry jurisdiction to establish the field -wide unitization requested b y Page -3-

4 NEWFIELD EXPLORATION MID-CONTINENT, INC. the appl ication, to-wit: ( I. ) Pursuant to Okla. Stat. tit ,.3 (a) (2009), whether advanced horizontal drilling technology constitutes a "form of joint effo rt calculated to substantially increase the ultimate recove ry of oil and gas from the common source of supply " ; and (II. ) Pursuant to Okla. Stat. tit (2009), whether the Plan fairly allocates production from prima ry and seconda ry phases of recove ry among the separately owned tracts covered by the unitized area ; (B.) Pursuant to Okla. Stat. tit (2009), whether the Plan collaterally attacks the provisions of existing spacing and pooling orders as a result of its proposed method of allocat i ng production between the separately owned tracts ; and, (C. ) Pursuant to Okla. Stat. tit , et seq. (2009), whether the Applicant meets the statuto ry burden of proof required by the Unitization Act. An oral appeal to the ALJ Report was timely filed by the Protestants, Apache, Panhandle, Farmers Union, Milam and Sons et al., and BP. 5. The appeal of the September 23, 2009 ALJ Report was heard by the Oil and Gas Appellate Referee Patricia D. MacGuigan on October 20, 2009, and taken under adv isement. 6. In response to the recommendation of the September 23, 2009 ALJ Report, the Applicant filed an Amended Unitization Plan on October 26, On November 29, 2009, the Report of the Appellate Referee on Oral Report of the Administrative Law Judge in Response to Respondents ' Motion to Dismiss was filed, in which the Referee recommended that the ALJ 's recommendation be upheld "to conduct an evidentia ry hearing to determine if the Commission has jurisdiction under the Unitization Act to inst itute New rfield 's Plan, as amended, and if Newfield at the hearing meets the burden of proof required under the Unitization Act. " 8. On November 25, 2009, Apache filed a Motion for Oral Argument before the Commiss ion en banc, wh ich was granted by Order No (dated December 7, 2009) and such arguments occurred on December 20, Following the arguments, the Commission took the Motions to Dismiss under advisement, and pursuant to a "Status Sheet," indicated "the Motions to Dismiss would remain under advisement pending a Final Repo rt and Recommendation by the Administrative Law Judge." 9. Because of the December 10, 2009, oral arguments to the Commission en banc regarding the Motions to Dism iss, the evidentiary hearing commenced on December 16, 2009, and was conducted thereafter on December 17, 2009, Janua ry 14 and 15, Februa ry 4 and 5, March 31, April 1, and May 6, During the pendency of the hearing, the Applicant filed subsequent amendments to the Plan of Unit ization on Janua ry 20, March 16, and April 16, Page -4-

5 NEWFIELD EXPLORATION MID - CONTINENT, INC. 10. The Protestants reasse rted the Motions to Dismiss at the conclusion of the Applicant's case i n chief on March 31, 2010, and at the conclusion of the Applicant 's rebuttal case on May 6, On May 6, 2010, the ALJ indicated that the Motions to Dismiss remained under advisement with the Commission and would be dealt with in the recommendation of the ALJ pursuant to the completed evident iary hearing. The ALJ took the Application and Motions under advisement at that time. 11. After a review of the pleadings, exhibits and all testimony presented in the evidentiary hearing before the Administrative Law Judge, the Commission finds that the Motion to Dismiss of Apache Corporation should be granted. The Applicant fa iled to meet the statutory burden of proof pursuant to Okla. Stat. tit et seq. 12. The Comm ission 's task when cons idering an application pursuant to the Unitization Act is to determine if the statutory parameters are present which justify the establishment of the unitized area for the subject common sources of supply. In Palmer Oil Corp. v. Phillips Petroleum Co., 1951 OK 78, 231 P.2d 997, 204 Okla. 543, the Court stated "[the Unitization Act] limits the findings required of the Commiss ion to the ascertainment of definite facts which in the opinion of the Legislature are suffic ient to justify application of the law. The present statutory prerequ isites are found in Okla. Stat. tit (2009). As argued in the motion phase, and reasserted at the conclusion of the Applicant's case in chief, the Protestant 's question the Commission 's statutory jurisdiction to entertain the instant application pursuant to the language of paragraph (a) of the statute, which provides that the Commission shall find : [T]hat the un itized management, operation and fu rther development of a common source of supply fo oil and gas or portion thereof is reasonably necessa ry i n order to effectively carry on pressure maintenance or repressuring operations, cycling operations, water flooding operations, or any comb ination thereof, or any other form of joint effo rt calculated to substantially increase the ultimate recovery of oil and gas from the common source of supply The Protestants contended in the motion phase and reasserted during the hearing : (A) The historical underpinnings of the Unitization Act do not permit the establishment of a field-wide unitization that proposes extraction methods, which are not part of the statutory list (pressure maintenance or repressuring operations, cycling operations, water flooding operations, or any combination thereof, or any other form of joint effort calculated to substantially increase the ultimate recove ry of oil and gas) ; (B ) Page -5-

6 NEWFIELD EXPLORATION MID -CONTINENT, INC. Any activities that diverge from the statuto ry list should be correctly classified as pr imary recove ry ; and (C) The Applicant 's proposed use of advanced hor izontal drilling techniques in the unitized cannot be classified as seconda ry recove ry methods ; therefore such measures cannot be determined to meet the statuto ry pre -requisites for unitization. 14. The Applicant countered these points with the pos ition that reliance on a doctrine of construction cannot be used to defeat the overriding legislative purpose of a statute. The Applicant also argued that the "joint effort" language in Okla. Stat. tit (a) (2009 ) empowers the Commission to recognize future advances in enhanced recove ry technology as justification for establishing a field -wide unitization. 15. Ultimately, the Appellate Referee and the Comm ission en banc upheld the ALJ 's recommendation that an evidentia ry hearing was necessa ry to determine if the facts in the instant application substantiated the Applicant 's interpretation of Okla. Stat. tit (a) (2009 ). The ALJ Report of September 8, 2009 stated : From the foregoing, it is recommended with respect to the first issue of statuto ry construction, that the Commission determine Okla. Stat. tit (a) (2009 ) presents an unresolved issue of interpretation, which should permit fu rther cons ideration of the application. The intent behind the Unitization Act's 1951 amendment, which added the language "or any other form of joint effort calculated to substantially increase the ultimate recove ry of oil and gas from the common source of supply..." to (a), has not been explained by the Oklahoma Supreme Cou rt. The seconda ry legal sources cited by Movants ce rtain[ly] establish a daunting challenge to Newfield 's contentions. However, as Palmer and Sp iers illustrate, the intricacies of engineering and geological analysis open the potential that advanced horizontal drilling technology might fall within the "joint effort " prov ision as an "enhanced recovery" process. ( Emphasis added and citations omitted). 16. In the instant cause, the Applicant failed to establ ish that the use of horizontal drilling methods in the Woodford Shale below the un itized area would constitute a "joint effort calculated to substantially increase the ultimate recovery of oil and gas from the common source of supply." Okla. Stat. tit (a) (2009). Rather than explain the geological and engineering intricacies of the use of horizontal drilling technology in a non-conventional natural gas reservoir such as the Woodfor d Page -6-

7 NEWFIELD EXPLORATION MID-CONTINENT, INC. Shale, the Newfield witnesses provided broad -brush treatment of the factual issues. The witnesses' use of generalizations, hypothetical examples, statistical projections, and averaging of significant reservoir parameters combined to underm ine the probative weight of the expe rt testimony presented to support findings about crucial jurisdictional factors required by the Unitization Act. 17. In itially, it must be considered that what ever "joint effort" is envisioned to mean by (a), the object of such extraction activity will be the "common source of supply" affected by the unitization. The Conservation Act defines "common source of supply" to be that "area which is underlaid or which, from geological or other scientific data, or from drilling operations, or other evidence, appears to be underla id, by a common accumulation of oil or gas or both. Okla. Stat. tit (3). The Unitization Act, however, provides a more precise definitional standard through the requirement that, "... only so much of a common source of supply as has been defined and determined to be productive of oil and gas by actual drilling operations may be so included within the unit area..." Okla. Stat. tit In the instant cause, Newfield 's geological w itness, Mr. Kubik, described the vertical e xtent of the Woodford Shale through the submission of well logs, which identified the top and bottom of the formation. Next, the witness described the reg ional presence of the formation through the submission of two (2) cross-section diagrams. Lastly, he presented an isopach map of the formation underlying the proposed unitized area. The Woodford Shale structure map, however, depicted the presence of numerous faults impact i ng the formation across the no rthern tier of sections (Sections 1, 2, 5, and 6) and much of the no rthwestern qua rter of Township 2N-11 E. The witness indicated the faults in the areas would compromise sealing barriers in the Woodford Shale to the flow of natural gas within the formation. Further, the engineering witness, Mr. Craig, developed a concept of "challenged acreage" pertaining to the northern halves of Sections 1, 2, 5, and 6. Thus, the Plan 's secondary phase allocation formulas would still include the areas, but incorporate the fact the acreage would not contribute gas to the production from wells drilled in the southern halves of the four (4) sections. Newfield 's geolog ical witness stated at several points in his testimony that the geological considerations were not the determining factor in the selection of the geographical dimensions of the Plan. Several sections i n the township were excluded from the unitized area because they constituted existing 640 acre drilling and spacing units for the Woodford Shale where Newfield was not the operator. Likewise, Newfield 's geological evaluation did not strenuously consider the porosity, permeability, and water saturation factors of the Woodford Shale underlying the proposed unitized area, but assumed values from regional studies of the formation. Even though core samples were available from the Cometti well in Section 13-2N-11 E, Woodford Shale porosity Page -7-

8 NEWFIELD EXPLORATION MID- CONTINENT, INC. and permeability values were not extrapolated, because the witness considered the core data to be unreliable. There was no comprehensive cons ideration of the Woodford Shale 's pore volume pertaining to any specific section incorporated in the Plan. 18. Newfield 's geological analysis was based on the assumption that the Woodford Shale possesses homogeneity across the application area. However, evidence adduced during the hearing indicate there is significant geological complexity in the formation. At several times during cross -examination of Mr. Craig, Newfield 's engineer, regarding the development of uniform ratios of MMcf per perforated interval for both unbounded and bounded well density condit ions it was revealed that a range in the Mmcf/foot ratio exists for existing wells. 19. It must be found that there was no substantial evidence presented which suppo rts a correctly wrought definition of the common source of supply as required by the statute, which could be impacted by a joint effo rt to substantially increase the ult imate recovery of oil and gas. The drill ing of extended horizontal well laterals in the Woodford Shale would not effect a substantial increase of gas recove ry from the purported single common source of supply compromised of 27 sections, when it is manifest from the evidence that numerous common sources of supply are shown to be present below the area. 20. It must be observed that the prima ry recovery of natural gas through the drilling of extended hor izontal wells laterals, even in excess of 5,000 feet, can be achieved with irregular 640 acre drilling and spacing units. Therefore, the premise for a joint effort to increase recove ry from a single common source of supply is not established by the exclusive justification of the drilling of such well laterals through shale deposits. Such drilling activity alone would not supplement, enhance or augment any aspect of the reservoir energy to achieve a greater recove ry of oil and gas than would otherwise occur from the Woodford Shale deposit. As Newfield ' s witnesses conceded on several occasions, the drilling of extended horizontal well laterals constitutes a prima ry recove ry technique, as that term is customarily defined. 21. Newfield 's engineering witness, Mr. Craig, did not provide any detail about the technological intricacies of horizontal drilling beyond the bare opinions about the benefits of extended lateral distances for horizontal Woodford Shale wells in southern Oklahoma. Mr. Craig's testimony (with broad, hypothetical examples and illustrations) covered the correlation between potential improvement in gas recove ry and the extended length of well laterals utilized in shale reservoirs. Likewise, Mr. Craig discussed cost/benefit analysis, which was contended to demonstrate the potent ial fo r Page -8-

9 NEWFIELD EXPLORATION MID-CONTINENT, INC. improved rates of return on investment through use of extended laterals in Woodford Shale wells. Such results, however, are being achieved at present by Newfield and other operators in Oklahoma, through the dr illing of extended horizontal well laterals on irregular 640 acre spacing units. 22. Newfield 's choice to not address inherent engineering practices involving high magnitude fracture stimulation of horizontal Woodford Shale wells constitutes a failure to establish substantial evidence about the intricacies of horizontal drilling technology, which the Commission requested from the Applicant. The overarch ing conclusion reached from review of the evidence presented in suppo rt of Newfield 's claim to a "joint effort" status for the drilling of extended laterals in horizontal Woodford Shale wells, is that such practices are prima ry recovery techniques, which do not add to the physical prope rties of the Woodford Shale 's reservoir energy present under in itial conditions. The drilling of extended horizontal well laterals is not enhanced recove ry methodology. It has occurred and continues to occur in Oklahoma on irregular 640 acre spacing units created pursuant to the Conservation Act. It has not been demonstrated by the evidence in the instant cause that the drilling of extended horizontal well laterals can be classified as a "joint effo rt" to increase the recove ry of gas from the entirety of the common source of supply. It is designed, however, to increase the recove ry of gas from the immediate area of the Woodford Shale depos it impacted by fracture stimulations, which might transpire as individual wells are completed. Ce rtainly, these conditions will be the same for the existing or "included wells " and the "enhanced recove ry" wells drilled in the unitized area ; all of which will be classified as "prima ry recove ry" wells under accepted principles of petroleum engineering. 23. Okla. Stat. tit (2009 ) establishes the requirements for a va lid unit ization plan. Pursuant to this statute, the formation of a field -wide unit involves the definition by the Commission of the area of the common source(s) of supply to be included in the unitized area. The unit can include all or a po rtion of a common source of supply, but, "only so much of a common source of supply as has been def ined and determined to be productive of oil and gas by actual drilling operations..." may be incorporated into the unitized area. The statute creates the essential difference between the allocation of interest in the unit production rendered by a f ield-wide unitization, and the allocation method provided by a single forced pooled spacing unit established under the Conservation Act. 24. In the case of a field-wide unitization, the allocation formula prov ided in the plan controls the distribution between "separately owned tracts." The statute provides guidelines for how the plan should define its allocation factors. The value of individual tracts is asse rted with reference to the value of the unitization as a whole. Page -9-

10 NEWFIELD EXPLORATION MID-CONTINENT, INC. Eason Oil Co. v. Corporation Commission, 1875 OK 14, 535 P.2d 283, at 7. The statute lists the parameters to be considered : A separately owned tract's fair, equitable and reasonable share of the unit production shall be measured by the value of each such tract for oil and gas purposes and its contributing value of the unit in relation to l ike values of other tracts in the unit, taking into account acreage, the quantity of oil and gas recoverable therefrom, location on structure, its probable productivity of oil and gas in the absence of unit operat ions, the burden of operation to which the tract will or is likely to be subjected, or so many of said factors, or such other pertinent eng ineering, geological, or operating factors, as may be reasonable susceptible of determination. Unit production as that term is used in this act shall mean and include all o il and gas produced from a unit area from and after the effective date of the order of the Comm ission creating the unit regardless of the well or tract with in the unit area from wh ich the same is produced. Okla. Stat., tit (b) (2009). See also Eason Oil Co. v. Corporation Commission, supra, at Rather than the allocation provided by an individual drilling and spacing unit on the basis of acreage ownership within the unit, the Unitization Act establishes that the separately owned tracts affected by the plan shall be assessed by an allocation formula, which may take into account the statuto ry parameters listed above. During the term of its existence, the Unitization Act's plan will supersede the impact of any preexisting spacing and pooling orders on the distribution of oil and gas production revenues from the unitized area. The Court has determined that the factors listed in Okla. Stat. tit (b) (2009) are "guidelines," which are not mandated for use in every tract allocation formula, but can be included or excluded depending upon whether they are pertinent. Eason Oil Co. v. Corporation Commission, 1875 OK 14, 535 P. 2d 283, at In the case of Newfield 's application, the amended Plan remains inadequate regarding its use of a purpo rted "split formula ", because : (1 ) The amended plan essentially returns to the exclusion of all currently producing wells, even though they are referred as "included wells ;" (2) The amended Plan is not suppo rted by probative engineering ev idence, which leads to proper determination about the value of separately owned tracts as compared to the value of the ent ire unitizat ion ; and, (3) The amended Plan 's allocation fo rmulas are not based upon pore space analys is of the Woodford Shale underlying the unitized area. Page -10-

11 NEWFIELD EXPLORATION MID- CONTINENT, INC. 27. According to Okla. Stat. tit (2009), there can be no exclusion of producing wells from the unitization plan, because the unitized area must consist of "only so much of a common source of supply as has been defined and determined to be productive of oil and gas by actual dr illing operations..." Likewise, the unitization plan must allocate unit production among the "separately owned tracts " incorporated in the Plan using an allocation formula, wh ich considers the tract 's, "fair, equitable and reasonable share of the unit production shall be measured by the value of each such tract for oil and gas purposes and it contributing value to the unit in relation to like values of other tracts in the un it..." Clearly, Newfield's amended Plan though its purported "prima ry phase " allocation formula fails to follow this statuto ry prescription. Even as amended, for all intents and purposes, the Plan excludes the existing wells in the subject common source(s)of supply, because it will meter the production from the wells separately and treat each well as a single 640 acre spacing unit. In effect, there is no analysis of "separately owned tracts " when existing 640 spac ing units are simply incorporated into the unitized area. These elements suppo rt the recommendation that the Commission should determine Newfield 's prima ry phase allocat ion formula fails to meet the statuto ry requirements of Okla. Stat. tit Even considering the impact of the amended Plan upon the status of the existing or "included wells," practical the Plan will exclude these wells from the allocat ion formula and other provisions of the Plan deal ing with future operations. Each well will be metered separately and the owners in ex isting 640 acre spacing un its will be paid on that basis as if the Plan did not exist as to such wells. The Plan 's characterization of the existing wells, therefore, creates unavoidable conflicts with existing spacing and forced pooling orders impacting the Woodford Shale formation in the 27 -section area. 29. As discussed above, under traditional Unitization Act procedures, pursuant to Okla. Stat. tit (2009, the field-wide unitization Plan would supersede any existing Conservation Act spacing and forced pooling orders affecting areas of the common source (s) of supply included in the Plan as shown from actual drilling operations. The amended Plan 's characterization of exist ing wells essentially excludes them from major provisions of field -wide unit ization. Therefore, Newfield 's application constitutes a collateral attack on the ex isting spacing and forced pooling orders, which violates the Conservation Act 's provision barring collateral attacked on such orders. Okla. Stat., tit (2009). Page -11-

12 NEWFIELD EXPLORATION MID- CONTINENT, INC. ORDER IT IS THEREFORE ORDERED by the Corporation Commission of Oklahoma that th is Application be denied. OKLAHOMA CORPORATION COMMISSION ana L~, Mijrpfiy, Chair.j J C d, Vi -,~hairman. i Bob Anthony,... ~ DONE AND PERFORMED this -71% y of - _, 20& 4 O DER OF THE COMMISSION : Secre c(ffie Commissio n APPROVED AS TO CONTENT AND FORM :,~~ J, RIC RD A. GRI S Attorney for Apache Corporatio n GREGORY L. MAHAFFEY Attorney for Newfield Explorat ion Mid -Continent, Inc. Page -12-

13 NEWFIELD EXPLORATION MID-CONTINENT, INC. RICHARD K. BOOKS Attorney for Panhandle Oil & Gas, Inc., Farmers Royalty Co., XTO Energy, Inc. and Chesapeake Energy Corp. LEE I. LEVINSON Attorney for Milam Sons Minerals, Steveco Trust, Phillip Viles, Judge Clay Mowdy, Marie Production Co., Michael Levinson an d Kenny Joe Smith JOHN R. REEVES Attorney for BP America Production Co., Antero Resources, Inc. and Red Oak Energy Pa rtners, LLC J. FRED GIST Attorney for Sinclair Oil & Gas Co. MICHAEL D. STAC K Attorney for Samson Resources Co. and Canaan Resources, LLC BENJAMIN F. HACKETT Pro Se Page -13-

14 , _ CAUSE CD NO TIO - ORDER NEWFIELD EXPLORATION MID-CONTINENT, INC. ROBERT A. MILLE R Attorney for Sedna Energy Co. DAVID PEPPE R Attorney for Devon Energy Production Co. LP and Continental Resources, inc. RONALD M. BARNES Attorney for Cimarex Energy Co. CHARLES L. HEL M Attor JMA ner y Co., LLC ~ _ VALERIE MICHELLE EVANS Attorney for Ronald McDonal d LOU ANN MOUDY Attorney for M. A. Viersen Revocable Trust A, Assistant General Counsel Page -14-

15 .0~ NEWFIELD EXPLORATION MID-CONTINENT, INC. 4~~ ` c ROBERTA. MILLE R Attorney for Sedna Energy Co. DAVID PEPPE R Attorney for Devon Energy Production Co. LP and Continental Resources, Inc. RONALD M. BARNE S Attorney for Cimarex Energy Co. CHARLES L. HELM Attorney for JMA Energy Co., LLC VALERIE MICHELLE EVANS Attorney for Ronald McDonal d LOU ANN MOUDY Attorney for M. A. Viersen Revocable Trust KEITH THOMAS, Assistant General Counse l SALLY SHIPLEY, Deputy General Counse l Page -14-

16 NEWFIE LD EXPLORATION MID-CONTINENT, INC. JIM HAMILTON, Assistant General Counse l BEN JACKSON, Commission Counsel Page -15-