1 E 2017 BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA APPLICANT: CONTINENTAL RESOURCES, INC. ) CAUSE CD NO.

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1 BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA APPLICANT: CONTINENTAL RESOURCES, INC. RELIEF SOUGHT: DRILLING AND SPACING UNITS ) CAUSE CD NO. ) LEGAL DESCRIPTION: SECTIONS 20 AND 29, TOWNSHIP 16 NORTH, RANGE 13 WEST, BLAINE COUNTY, OKLAHOMA 1 E oc,,16 D 2017 COURT CLERK'S OFFICE - OKC CORPORATION COMMISSION REPORT OF THE ADMINISTRATIVE LAW JUDGE OF OKLAHOMA This Cause came on for hearing before Michael Norris, Administrative Law Judge for the Corporation Commission of the State of Oklahoma, in the Commission's Courtroom, 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 reporting to the Commission. CASE SUMMARY: 1. Applicant, Continental Resources, Inc. (Continental) amended this spacing application to dismiss all formations except the Mississippian less Chester, Woodford and Hunton in Section 20. Spacing currently exists in Section 20 for the Mississippi and Chester. There is current spacing in Section 29 for the Mississippi Lime and Chester. There is no spacing for the Woodford and Hunton. Continental has requested that the current Mississippi Lime spacing be vacated and Mississippian, Woodford and Hunton spacing be established in section 29. Continental believes there isn't any question that these formations underlie the two sections. The applicant amended its request for spacing and dismissed the spacing request for any common sources of supply above the Mississippian. They also withdrew their request to vacate spacing orders that include the Tonkawa, Cottage Grove, Oswego, Red Fork and Chester. 2. Previously, a spacing was established in section 20 for the Mississippi and Chester as well as other formations. Section 20 was pooled in 2005 and a well was completed. The well was drilled into the Chester and did not penetrate the Mississippi. It was completed in the Springer and is still producing. The applicant reasons that they should vacate the Mississippi spacing because it

2 was not penetrated and the pooling would no longer apply to the Mississippi. This gives Continental the opportunity to establish the Mississippian less Chester as the common source of supply to be drilled and completed. The applicant believes that it is more prudent to develop the Mississippian than on individual lenses or pieces of the Mississippian. 3. The protestant, Newfield Exploration Mid-Continent, Inc. (Newfield) is opposed to vacating an existing order and in essence renaming it the same thing. Protestant maintains that the Technical Department defines the Mississippi as geologically covering everything from the base of the Chester to the top of the Woodford. Newfield contends that if the applicants are allowed to vacate spacing in this instance it will abrogate the old pooling order. This would cause a loss of vested rights according to Newfield. They contend the Mississippi has been previously spaced and is appropriate. The protestant maintains horizontal spacing is what is being utilized in this area. 4. Newfield also contends that there is an underlying operations issue and Continental is seeking to gain some advantage as an operator. Newfield contends that by respacing a unit you destroy vested rights. Continental believes their position does not take away vested rights and it is consistent with the geology definitions adhered to by the Technical Department. RECOMMENDATIONS: 1. It is recommended that the request for the creation of 640 acre drilling and spacing units in Section 20 for the Mississippian less Chester be granted. The spacing for the Hunton and Woodford common sources of supply pursuant to Commission order should be extended into Section In Section 29 the request to vacate spacing for the Mississippi Lime should be granted. The existing spacing for the Chester should remain in Commission order as it applies to Section acre drilling and spacing units should be created for the Mississippian less Chester, and spacing for the Woodford and Hunton common sources of supply pursuant to commission order should be extended into Section Continental's request was for conventional spacing and should be granted. Page 2

3 HEARING DATE(S): March 29, 30, 2017 APPEARANCES: Karl F. Hirsch, attorney, appeared on behalf of applicant, Continental Resources, Inc. Gregory L. Mahaffey, attorney, appeared on behalf of Newfield Exploration Mid-Continent, Inc. Ron Barnes, attorney, appeared on behalf of Cimarex Energy Company James Deuschle, attorney, appeared on behalf of Accipiter, LLC Freda Williams, attorney, appeared on behalf of Chesapeake Operating, LLC and Chesapeake Exploration, LLC Richard Grimes, attorney appeared on behalf of Paloma Resources, LLC, Vitruvian Exploration III, LLC and Kaiser-Francis Oil Company John Reeves, attorney, appeared on behalf of Devon Energy Production Company, LP Eric King, attorney, appeared on behalf of Dorchester Resources, LP Richard Books, attorney, appeared on behalf of Highmark FINDINGS AND SUMMARY OF EVIDENCE 1. The following numbered exhibits were accepted into evidence: 1. Continental Production map Page 3

4 2. A copy of Order number A copy of Order number A copy of Order number Newfield Production map 6. Newfield Production map 7. Newfield Offset Well Data map 2. Applicant called as the first witness Ms. Lisa Lee, petroleum landman. Her qualifications as an expert landman were accepted without objection. 3. She stated that the application is requesting spacing occur through vacating, extension and establishment for the common sources of supply. Ms. Lee requested that the application be amended to request spacing for the Mississippian less Chester and understood that the formations above the Mississippian were to be dismissed. Further, applicant requested in so far as section 20 is concerned that the application be amended to request spacing for the Mississippian less Chester. 4. The prerequisites for spacing were discussed and verified. The applicant owns the right to drill in the common sources of supply in sections 20 and 29. Proper notice was established and the witness testified that due diligence was exercised in attempting to give actual notice. 5. An amended application was filed and request that the Mississippi Lime spacing in section 29 established by order and the Mississippi spacing in section 20 established by order be vacated. 6. Ms. Lee is aware of a pooling that was done 2005 for section 20. This pooling included the Mississippi. Ms. Lee reviewed the completion report for the well that was drilled. It shows that the well was completed in the Morrow Springer. Page 4

5 7. She has reviewed proposal letters that were sent by Newfield approximately one week ago that includes section 20. Those letters named the Mississippian and did not designate anything about horizontal or vertical spacing. 8. On cross-examination Ms. Lee admitted that the spacing application was filed in June and protested by Newfield a few weeks after they were set. The cases that were protested were set for November trial dates and were then continued off the date. The continuance was requested by Continental to file an amended application. She testified that respondents were added to the amended application because title changed dramatically during that time. 9. Continental owns 147 acres, of record, in section 20. She stated that Continental has a joint venture with Dewblaine in the 147 acres. She does not know terms of the agreement. She further testified that Continental owns 165 acres in section 29. Continental has the support of Devon and Cimarex which brings their acreage to 460 acres. Ms. Lee does not know if agreements are signed with Devon and Cimarex. 10. The well that was drilled was a Woodford well. It was commenced under an emergency order. At the time the well was commenced Continental owned, of record, 165 acres in one section and hundred and 147 acres in the other. 11. Ms. Lee testified that pooling order was obtained by Chesapeake in 2005, covering section 20. That well was completed in the Morrow Springer. It is the Dadisman 1-20 well and it is operated by Newfield. Newfield purchased the well from Chesapeake. She stated that all respondents to the pooling order were subject to the order for those zones in the Mississippi. Continental acquired the deeper rights from an agreement with a depth clause that gave them the rights to formations 100 feet below the base of the Morrow Springer. The shallow rights are currently held by the Dadisman well. 12. The witness stated she has seen a Newfield proposal letter for a Mississippian horizontal well. Continental is currently drilling a Woodford well. She agreed that a proposal letter does not usually include information concerning vacating or establishing spacing. That letter usually indicates the geologic interval they are proposing. This application is seeking spacing for the Mississippian less Chester. 13. Upon redirect examination Mr. Hirsch requested that the record reflect there was no prehearing conference or payment filed in this cause setting it for Page 5

6 hearing in November. Mr. Mahaffey stated that he had agreed to dates for September and November 16 or 18. Mr. Mahaffey stated that he also had s requesting the cause be continued off of those dates. It was ruled that there were no scheduled hearings requested for those dates. 14. The witness stated that an amended application was filed to show changes from title opinions for sections 20 and 29 that were received in September, The amended application was filed in November, Ms. Regan Bertrand, geologist, was called for the applicant. Her qualifications were accepted. The court took judicial notice of Orders numbered , , , and they were incorporated into the record. 16. This witness stated that she is familiar with the application as now amended that requests order No in section 20 be vacated and order No in section 29 be vacated. She is also aware that this application requests spacing be established by extending orders No and for 640 acre spacing units for the Woodford and Hunton in section 31 and section 17. She understands the application was amended to dismiss all formations above the Mississippian. She also understands that the applicant is amending the request for section 20 spacing be established as Mississippian less Chester rather than Mississippian. 17. Ms. Bertrand stated that these common sources of supply underlie all or substantially all of sections 20 and 29. The sanctions that have been previously been spaced on the same common sources of supply underlie these sections. The permitted well location of these orders would be 1, A plat that shows the wells in sections 20 and 29 and the surrounding sections was prepared by Ms. Bertrand. A type log was attached to the plat. There are no producing wells in section 29. In section 20 the Newfield Dadisman 1-20 well is producing. She has reviewed the log of that well and it is completed in the Morrow Springer. She stated that the well reached total depth and the top of the Chester. She stated that this well did not penetrate the Mississippian. It also did not penetrate the Mississippian less Chester. There have been no other wells drilled deeper than the Chester in section 20. She stated the Mississippian, Woodford and Hunton will produce gas and gas condensate. Page 6

7 19. She further testified that there are no productive Hunton wells but there was a pilot hole in section 17 that did penetrate the Hunton. This pilot hole did not produce from the Hunton. Ms. Bertrand utilized the type log to identify the tops of the formations being spaced. She stated there are several penetrations for the Woodford in this area. There are also Mississippian producing wells in this 12 section area. Ms. Bertrand indicated there are instances in this area of wells with perforations in other formations. There is one Chester producing well in section Ms. Bertrand's definition of the Mississippian would be the top of the Chester to the base of the Kinderhook or top of the Woodford. So, top of the Chester to the top of the Woodford. She defined the Mississippi Lime as what is also called the Meramec. She defines that as from the top of the Merrimack to the top of the Woodford. When asked to define the Mississippi she stated she did not know what it is. She indicated that the geological chart used by the Corporation Commission does not list a Mississippi formation. The Mississippian and the Mississippi Lime are listed. She believes any definition of the Mississippi is ambiguous and would not know where the base of the Mississippi would be called. It is important to Continental that the Kinderhook not be spaced separately from the rest of the Mississippian. She believes the Kinderhook is approximately 30 to 35 feet thick. At that thickness the Kinderhook is not a single zone target for drilling and it is possible that a well bore could migrate from the Woodford into the Kinderhook. 21. There is a possibility of faulting in this area. It is possible while drilling this well to encounter a fault that could have a 20 to 30 feet throw. Such a fault could place the well bore outside of the Woodford. It is important that associated common source of supply that might be penetrated be included within the order. 22. There has been a change of condition or a change of knowledge of condition in the development of the Mississippian since The advent of horizontal drilling has affected a change in spacing. The drilling of horizontal wells and fracture stimulation affect common sources of supply much differently. This is different than wells drilled in You can now produce hydrocarbons from a much larger area. 23. Upon cross-examination Ms. Bertrand acknowledged Order No The order actually spaced the Mississippian and Hunton in sections 20, 27 and 28. She testified that the applicant is not asking to vacate the entire order but Page 7

8 trying to vacate it as to section 20 for these two common sources of supply. This order indicated that the top of the Chester was about 10,150 feet. Ms. Bertrand picked the top of the Chester in this section at 10,330 feet. After reviewing her spreadsheet of the formations she corrected the top of the Merrimack to 11,286 feet. She stated the regional dip in the area goes North East to Southwest and Union deeper as you move into the basin in that direction. The regional dip is 2 to 2 1/2 degrees. From the calculations made concerning the depth she agreed it is a shallow depth in this area. 24. Ms. Bertrand testified that she believes that the formations in question and the formations she utilized in the log are the same and they underlie both areas. After much discussion, questions and comparisons Ms. Bertrand agreed that what is spaced as the Mississippi in Order No starts at the top of the Meramec. 25. The applicant is requesting spacing for the Mississippi less Chester in section 20 and the Mississippian in section 29. This is because there is a well that penetrates the Chester in section It was agreed that Commission Order spaced the Mississippi Lime in four sections besides section 29. The applicant is seeking to vacate the Chester and Mississippi Lime in section 29 and re-space that as Mississippian. The witness agreed that their definition of Mississippi Lime covers from the base of the Meramec to the top of the Woodford. This includes the Osage and Kinderhook. If you add the Chester and Mississippi Lime you have spaced the entire Mississippian. Commission Order is conventional spacing. She also agreed that if the definition of Mississippi includes the Meramec, Osage and Kinderhook then that definition would not be ambiguous. If the Technical Department agreed with that there would not be a concern about Mississippi spacing. It was stated that no one is objecting to the spacing of the Woodward. 27. There was abundant cross-examination concerning horizontal spacing versus conventional. The witness understands the difference in the setbacks for horizontal and conventional spacing. She also agreed that the horizontal setback for the Woodford would eliminate the need for a location exception on a single unit well basis. Ms. Bertrand was not aware of the different allowable treatment for a gas well from conventional spacing to horizontal spacing. She agreed there would be in economic savings if the applicant could avoid filing a location exception and separate allowable applications. She did not know any geologic downside to not vacating the existing vertical spacing but letting it Page 8

9 coexist with the horizontal spacing. She explained the reason the applicant drilled their well from north to south. 28. Redirect examination resulted in Ms. Bertrand stating that the applicant requests permission to drill its Woodford horizontal wells 150 feet from the north and south lines. Also, they seek 330 feet from the East and West lines and 150 feet from the north and south lines for Mississippi horizontal wells. 29. She stated that the Meramec was a prospective formation and it would behoove whoever drills a Meramec horizontal well to have this zone directly above the Meramec, which is the Chester. Mississippian spacing, which includes the Chester, would be advantageous. 30. The witness agreed that there could be two operators drilling two wells under two different spacing orders. One order could be conventional spacing and the other could be horizontal spacing. Both wells could be horizontal wells. This witness does not believe the 1981 order assists in ascertaining what is covered by the term Mississippi. She testified that he does not have any evidence that the Commission as defined Mississippi 31. There was lengthy testimony regarding the calculations for regional dip on recross examination. This did not result in clarification of the definition of Mississippi or for spacing nomenclature. Ms. Bertrand again agreed that if the Mississippi was defined by the Technical Division as being from the top of the Meramec to the top of the Woodford it would equate geologically to the Mississippi less Chester. 32. Mr. Keith Drennen, petroleum engineer also testified on behalf of Continental. There were no objections to his qualifications as an expert witness. He stated he is familiar with this application and with the order number that established 640 acre spacing for the Chester and Mississippi common sources of supply in section The witness also established that he is familiar with Corporation Commission rule 165: This is the rule for drilling and spacing unit establishment and modification. Notice was taken of said rule and it was incorporated into the record. Page 9

10 34. Mr. Drennen stated that this rule discusses the coexistence of spacing orders when horizontal well spacing is created in a unit where conventional spacing already exists. Under the rule a party is permitted to drill wells under conventional spacing and at the same time they are permitted to drill wells under the horizontal spacing. 35. Because there is an operator named in a pooling in section 20 under conventional spacing, you could have two operators for the same common source of supply if a pooling order issued under a horizontal spacing. It is Mr. Drennen's opinion that this would not be a desirable result for the operators. You could have different techniques, facilities and drilling plans. These factors could create environmental and economic impacts. He believes this is not a desirable result. 36. On cross-examination Mr. Drennen stated that he recognized that an operator will not be determined from this spacing. If the operators could reach an agreement they could share certain facilities such as a pad. He agreed there would be separate facilities to the extent the operators drill in separate zones. 37. He agreed that it is Continental's position that horizontal spacing is not needed if the interval spaced is from the top of the Meramec down to the top of the Woodford. If there is conventional spacing that covers that interval then Continental is satisfied. He agreed that there will only be one operator. 38. Mr. Drennen understood that the Commission can clarify and construe in order. The Commission could clarify that the Mississippi described above is the same as Mississippian less Chester. 39. On redirect examination Mr. Drennen stated that if there was a clarification concerning this spacing there would still be the operator issue that was discussed. There is also the problem of prevention of waste and protection of correlative rights. 40. Recross examination developed the statement from Mr. Drennen that if Continental had not tried to drill under emergency order the problem of the operator might have been eliminated. The applicant did rest. Page 1 0

11 41. The protestant called the Newfield land man, Mr. David L Goodwin as its next witness. His qualifications as a petroleum Landman were accepted. There was no objection. 42. Mr. Goodwin testified that Newfield owns a substantial interest in the two subject sections as well as sections 17, 20 and 32. These sections were part of an approximately forty thousand acre acquisition by Newfield from Chesapeake Exploration. Newfield operates wells in those sections. Newfield intends to develop these sections. He testified that Newfield controls 366 acres in section 20. Insofar as the Mississippi is currently spaced by order Newfield is the operator of the Mississippi. Except for the 147 acres owned by Continental Mr. Goodwin believes that the remaining 493 acres are subject to pooling order number He believes Newfield is currently the operator. Two of the formations covered are the Mississippi and Chester. That pooling order has not been modified. Newfield has filed or intends to file an application to modify the order as to the operator. The form 1073 filed with the Commission recognizes Newfield as the operator of the Dadisman well in section 20. Newfield believes that this Mississippi well allows Newfield to be the operator in the Mississippi under this pooling order. 43. This witness stated that if there was geological testimony that the Mississippian less Chester is the same as Mississippi then Newfield would request that this application be denied as far as vacating the Mississippi in Section 20. Newfield is concerned that this could also happen in other sections. There are other pooling orders that cover Mississippian and Mississippi rights that Newfield is claiming. They are not opposed to spacing the Woodford and Hunton on conventional spacing basis. They believe these sections should be developed together. 44. Cross-examination ensued wherein Mr. Goodwin testified that under the pooling order just discussed Chesapeake is the operator. Newfield intends to file a change of operator application. They are the operator of the well that has been drilled by virtue of the 1073 filed. He also stated that Newfield came into title in 2017 because of the Chesapeake acquisition. Upon further examination Mr. Goodwin identified an assignment dated July 1, 2015, from Providence Exploration to Newfield. Therefore, he acknowledged that Newfield was acquiring the leases in the area in Mr. Goodwin stated that he believed his earlier testimony about Newfield being in title included their activity in Page 1 1

12 45. Newfield owns of record title 266 acres and they have an agreement that is pending with Highmark Resources LLC that is for an additional 100 acres. That is the 366 acres they claim as previously discussed. He has been devised that Highmark would support Newfield as operator. 46. It was determined that Continental, Cimarex and Devon own a total of 460 acres in the section. The combined acreage for both sections is acres owned by Continental and 536 acres for Newfield. 47. Mr. Goodwin testified that the Mississippi was not penetrated in Section 20. He believes the Chester was penetrated. He stated that the Mississippi was not tested but the other zones were tested in accordance with paragraph seven on page eight of Commission Order No If the Mississippi is re-spaced Newfield would lose all of the acres that were required to the forced pooling order less the 147 acres owned by Continental. Some of Newfield's interest are the leases that were acquired from Chesapeake. He does know the total Newfield owns in section 20 but does not know the source of all that ownership. 49. Newfield proposed drilling wells in sections 20 and 29. Proposals were sent March 22, This was after the hearing on Continental's application for emergency order. Newfield has been in title since Both sections 20 and 17 are held by production so Newfield felt that was not in need to propose the drilling of a well right away. They did propose a well in section 29. Section 29 is not held by production. 50. Upon redirect examination Mr. Goodwin stated that Newfield has been one of the most active operators in the Stack area in the last 5 years. They have drilled hundreds of the laterals in the area. Most of them have been extended laterals and the majority were for the Mississippi. The acquisition from Chesapeake was for the Mississippi. Newfield did take into account the number acres that Chesapeake owned in the Mississippi as part of the consideration. However much of it they might lose would be a loss of vested rights in his opinion. 51. There was additional testimony concerning the acreage owned by Newfield and the plan of development. It was established that Newfield has a significant interest in the area. It was stated that this is not an operator fight but a spacing. The witness acknowledged they have pooled acres in the Mississippi. Page 12

13 It is Newfield's position that they would lose their Mississippi acreage if the Mississippi spacing is vacated. They also believe they would lose their right to propose subsequent Mississippi wells in the pooling if this occurs. Mr. Goodwin also stated that the previous dealings with Continental are no longer viable and they are proceeding on their own. 52. Upon recross examination there was more testimony concerning agreements and support of the parties. The testimony did not add any substantive evidence concerning the spacing application. They same result occurred in the rest of this witness's testimony. 53. Mr. Daniel Ramirez, geologist, was called as the next witness. There were no objections to his qualifications. He stated that he prepared exhibits to help facilitate his testimony. 54. Mr. Ramirez testified that Newfield would like to drill an initial multiunit horizontal well in sections 17 and 20 targeted to the Mississippi. He stated that his exhibits show production, dry holes and abandon wells which are color coded for the currently producing formations or previously produced. It also introduced a log from section 14 which is approximately 3 sections to the west and one section north. These exhibits were provided to show the lithology and geology that would be representative as far as the geology underlying sections 20 and 29. These are his geologic interpretations. 55. He referred to spacing Order His opinion is that the Mississippi described in this order covers the top of the Meramec to the top of the Woodford. This would include the Meramec, Osage and Kinderhook. He based this opinion upon his geologic study and from conversations with the Oklahoma Corporation Commission Technical Geology Group. He stated that the Group identifies the Mississippi as everything from the top of the Meramec to the top of the Woodford. He also based this on the rock age. He noted that this order did break out the Chester but other than that he testified that the Mississippi and Mississippian are all Mississippi age rock. He does not see a difference in the Mississippian age rock. 56. There is no objection by Mr. Ramirez to the depths stated by the applicant for the formations listed in the application. They also do not object to conventional spacing for the Woodford and Hunton. Newfield is asking that the application for section 20 be denied as to vacating 640 acre Mississippi. In his opinion there is no difference between the Mississippi and Mississippian less Page 13

14 Chester. He sees no reason to change the nomenclature. The log presented as identifying the Mississippian indicates intervals of the Meramec Osage and Kinderhook. Newfield believes everything is correctly spaced. 57. Upon cross-examination Mr. Ramirez stated that he believes the nomenclature Mississippi and Mississippian refers to the same thing. He also stated that the Mississippian does include the Chester. He also stated that he believes that the Mississippi includes the top of the Merrimack, without the Chester, down to the top of the Woodford. He believes the Mississippi and Mississippian are the same. 58. He agreed that in Section 20 Mississippi spacing and Chester spacing. Therefore in section 20 the spacing orders would indicate that the Mississippi and Mississippian are not the same because the Chester is spaced separately. In Section 29 the Mississippi Lime and Chester are spaced. He stated that sometimes the Mississippi includes the Chester and sometimes it does not depending on the spacing order. That is why the Oklahoma Corporation Commission clarifies these matters. He believes Mississippi Lime was utilized at a different time and it is older nomenclature. Mr. Ramirez understands that there are spacing orders that have spaced the Mississippian that would include the Chester. He also acknowledged top of the Kinderhook is down close to the top of the Woodford. He is not sure when you see an order that spaced the Mississippian how to tell if it spaces from the top of the Meramec to the top of the Woodford or from the top of the Chester to the top of the Woodford. The same would apply for an order that spaces the Mississippi. 59. Notice was taken of the spacing application in cause CD T. In that application Newfield requested spacing for the Mississippian. This spacing is included section 29. Mr. Ramirez testified that at the depth shown in the application, 11,500 feet, the top of the Mississippian would be at the top of the Meramec. In this particular application it would not cover the Chester. Mr. Ramirez observed that in this area there is no Meramec shale and if that occurs they would call it Mississippi or Mississippian. He also noted that the Kinderhook is also spaced separately. There were further questions concerning order number This information further demonstrated there have been inconsistencies in the nomenclature. 60. Upon redirect examination Mr. Ramirez testified that as you move to the north in this region you do not have the deposition of the Meramec. He noted that Continental has spaced the Kinderhook separately and other places. He Page 14

15 reiterated that the Mississippi is from the top of the Meramec to the base of the Kinderhook in his opinion. Therefore, his opinion is that there is not a need to change the spacing to the Mississippian less Chester. 61. During his recross examination Mr. Ramirez agreed that the Mississippi Lime or Mississippian Limestone is not equivalent to the Mississippian. Redirect examination then occurred and Mr. Ramirez reiterated that the Mississippi includes the Meramec, Osage and Kinderhook to the top of the Woodford. He also stated that he conferred with Mr. Bob McCoy and that the Technical Department agrees with Mr. Ramirez's assessment. The protestant did rest. 62. It was noted for the record that the court previously ruled that the only cause opened and considered was the spacing application. The parties agreed that was the ruling of the court. RECOMMENDATIONS AND CONCLUSIONS 1. After taking into consideration all the facts, circumstances, evidence and testimony presented in this cause, it is my recommendation that the application of Continental Resources, Inc. should be granted in part and modified in part. 2. The Mississippi and Chester were previously spaced in Section 20. As stated Section 20 was pooled and a well was drilled that penetrated the Chester. The Chester should remain spaced under that order. The Mississippi has never been developed in this section and can be vacated as requested by the applicant. The most recent Technical Department definition for the Mississippi that is known to this court is that it entails the top of the Meramec to the top of the Kinderhook. The spacing requested by applicant will utilize current terminology for the Mississippian. Many definition changes have been noted in the Mississippian common source of supply since the spacing order for the Mississippi in Section 20 and new technology for development has pushed to the forefront. Applicants request for the Mississippian less Chester combines all the zones requested for that common source of supply and will avoid confusion and misunderstanding of what is spaced therefore; it is recommended that the request for the creation of 640 acre drilling and spacing units for the Mississippian less Chester be granted. The spacing for the Page 15

16 Hunton and Woodford common sources of supply pursuant to Commission order should be extended into Section The Mississippi Lime and Chester were spaced in section 29 by Commission order number The applicant has requested these be vacated and that the Mississippian be spaced. Continental has stated this will clarify the formations to be spaced as there is agreement as to what zones are included in the definition of the Mississippian. Previous testimony determined that the definition of Mississippian would be from the top of the Chester to the base of the Kinderhook. This agrees with the definition utilized by the Technical Department. Section 29 does not have the issues outlined for Section 20. However, to facilitate similarity of spacing between these two sections the following is recommended. The request to vacate spacing for the Mississippi Lime should be granted. The existing spacing for the Chester should remain in Commission order as it applies to Section acre drilling and spacing units should be created for the Mississippian less Chester, and spacing for the Woodford and Hunton common sources of supply pursuant to commission order should be extended into Section Continental's request was for conventional spacing and should be granted. RESPECTFULLY submitted this 6th day of October, MN:sm Administrative Law Judge xc: Karl Hirsch Gregory Mahaffey Freda Willliams Ron Barnes Richard Grimes John Reeves Page 16

17 Eric King Richard Books James Deuschle Maribeth Snapp, Judicial & Legislative Services Director Oil Law Records Court Clerk 1 Commission Files Page 17