H. Michael Keller (USB #1784) Rosemary J. Beless (USB #0272) MatthewS. Brahana (USB #13154) Fabian VanCott 215 South State Street, Suite 1200 Salt Lake City, Utah 84111 Phone: 801.531.8900 Fax: 801.596.2814 mkeller@fabianvancott.com rbeless@fabianvancott.com mbrahana@fabianvancott.com

Fl LED MAY f1 20t6

SSCRET~ BOARD OF Otl, GAS & MINING

BEFORE THE BOARD OF OIL, GAS AND MINING\

DEPARTMENT OF NATURAL RESOURCES

STATE OF UTAH

IN THE MATTER OF THE REQUEST FOR AGENCY ACTION OF AXIA ENERGY II, LLC. FOR AN ORDER MODIFYING THE BOARD'S ORDERS ENTERED IN CAUSE NOS. 131-14 AND 139-90 TO ESTABLISH TWO SPECIAL 2,560-ACRE (OR SUBSTANTIAL EQUIVALENT) DRILLING UNITS FOR THE PRODUCTION OF OIL, GAS AND ASSOCIATED HYDROCARBONS FROM THE LOWER GREEN RIVER-WASATCH (COLTON) FORMATIONS, AND AUTHORIZING DRILLING OF UP TO 80 PRODUCING WELLS PER UNIT SO ESTABLISHED WITHIN SECTIONS 27, 28, 33, & 34; AND SECTIONS 29 THROUGH 32, RESPECTIVELY, TOWNSHIP 2 SOUTH, RANGE 1 WEST, USM, DUCHESNE AND UINTAH COUNTIES, UTAH.

RESPONSE TO OBJECTIONS

Docket No. 2016-011

Cause No. 139-138

COMES NOW, Axia Energy II, LLC ("Axia"), by and through its counsel of record, and

replies to the objections to its Request for Agency Action ("RAA'') filed in this matter by the

Division of Oil, Gas, and Mining ("DOGM") and Newfield Production Company ("Newfield"),

as well as the Comment Letter filed by the National Association of Royalty Owners - Rockies

("NARO-Rockies"). In response to the objections, Axia has had multiple conversations with

DOGM, Newfield, and EP Energy E&P Company, L.P. ("EP") to attempt to resolve their

concerns about the RAA, as proposed.

I. Axia Withdraws Its Request For Any Non-consent Penalty.

Axia withdraws without prejudice its request for the Board to enter any non-consent

penalty as part of the spacing order requested in this RAA. While Axia believe the Board has the

authority to enter a multi-well non-consent as part of a spacing order and that the purpose of the

non-consent penalty is furthered in this situation considering the robust drilling plan proposed by

Axia, Axia will pursue a non-consent penalty for the drilling units in Axia's requests for pooling.

II. Axia Is Agreeable To Reducing The Size Of The Requested Drilling And Spacing Units ("DSUs") And The Intensity Of The Drilling Program, As Detailed Herein, Including Reducing The DSUs To Stand-Up 1,280s, As Well As Reducing The Total Number Of Wells Allowed In Any DSU And Increasing Boundary And Well Setbacks In Each DSU.

In its RAA, Axia weighed the existing geologic and engineering characteristics and

balanced the additional costs of drilling with maximizing the amount of area from which Axia

could recover oil and gas. The approach set forth in the RAA treated each of the proposed four-

square mile drilling units as a self-contained production block, where flexibility in what and how

wells were drilled were retained to allow Axia to maximize the total recovery of oil and gas

while minimizing both the amount of oil left in the ground and the surface impact, for the benefit

of all working interest, royalty owners, Axia' s employees, the nearby communities, and the

State.

In light of the objections1 and concerns expressed, Axia is agreeable to reducing the size

of the requested drilling units and the intensity of the drilling program. Axia has determined -

based on the geology, engineering, and prospective economics- that it would be satisfied and it

could reasonably develop the Subject Lands with a Spacing Order that establishes drilling and

spacing units for the Subject Lands as follows:

1. Modifying the Board's 131-14, 139-42, and 139-90 Orders insofar as they pertain to the Subject Lands to provide as follows:

2. Establishing four 1,280-acre (or substantial equivalent) stand-up drilling units for the production of oil, gas, and hydrocarbons from the Subject Formations (as defined in the RAA), comprised, respectively, as follows:

Township 2 South, Range 1 West, USM Sections 27 and 34 Sections 28 and 33 Sections 29 and 32 Sections 30 and 31

3. Authorizing up to 32 wells per drilling unit, which may be any combination of long lateral (in excess of one mile in length) horizontal wells ("LHWs"), short lateral (less than one mile in length) horizontal wells ("SHWs"), vertical and directional wells (collectively referred to as "All Wells"), allowing All Wells to be drilled and produced in each such drilling unit so established, and providing that the order in which All Wells are drilled, the formation targeted by each well, and the orientation of each well, where applicable, shall be at Axia's discretion;

4. Providing that no producing interval of an authorized LHW or SHW may be located closer than 330 feet from the north and south boundary and 560 feet from the east and west boundary of each drilling unit so established without obtaining an exception location approval in accordance with Utah Admin. Code Rule R649-3-3. With respect to All Wells within the same drilling unit, there shall be no inter-well setback distance required for wells that are producing from different stratigraphic intervals. With respect to All Wells within the same drilling unit, interwell spacing for wells producing from the same stratigraphic interval shall be not less than 330 feet, provided stacked LHW or SHW laterals are drilled at least 1 00 feet or greater apart in vertical distance;

1 NARO-Rockies, DOGM, and Newfield all objected that the originally-proposed spacing order predicated on the drilling program described in the Exhibits unnecessarily tied up mineral develop in too large of an area and for too long. The objections do not argue specifically that either the engineering or the geology would not support a comprehensive drilling program, like the one proposed in the RAA.

5. Providing that the surface location of any authorized LHW or SHW may be located either anywhere on the drilling unit or anywhere off the drilling unit so established ("off-unit well"), as long as Axia obtains all necessary surface and sub-surface authorization for an off-unit well location from the owners, and requiring that all off-unit wells, if any, shall be cased and cemented to the 330 or 560ft. setbacks as set forth in (4) above, both to be evidenced and satisfied by a self-certification to such effect executed by the Operator of said drilling unit and filed with the Utah Division of Oil, Gas and Mining (the "Division") and the other setbacks for the laterals set forth in ( 4) above are maintained;

6. Providing that the production interval of any LHW, SHW, vertical or directional well so authorized may not be closer than 330 feet to the three existing wells identified in Paragraph 6 ofthe RAA without obtaining an exception location approval in accordance with Utah Admin. Code Rule R649-3-3. Production from said three existing wells shall continue to be allocated on a sectional (640-acre or substantial equivalent) basis in accordance with the Applicable Orders;

7. Providing no vertical or directionally drilled well may have producing intervals closer than 660 feet from a drilling unit boundary, without an exception location approval in accordance with Utah Admin. Code Rule R649-3-3;

8. Presuming this Request is granted, making said Order effective as of the first day of the month following the date of first production from the first LHW drilled upon the respective drilling unit, at which time production from not only the first LHW, but also production from any additional LHW's or new producing SHW's and vertical and directionally-drilled wells, all shall be allocated on a pro-rata acreage basis over the entire 1 ,280-acre drilling unit; and

9. Making such findings and orders in connection with this Request as it deems necessary; and

10. Providing for such other and further relief as may be just and equitable under the circumstances.

The foregoing provisions would mitigate many of the objections raised in this matter and

substantially mirror the provisions of Spacing Order 139-134, which was issued to Newfield in

2015. 2 The provisions, contain a 20% reduction in well density when compared to the original

2 The primary difference is an increase in the total number of wells, from 25 (17 horizontal/8 vet1ical) to 32 (most effective combination of horizontal, vertical, and directional wells). Additionally, there are certain structural changes to the proposed provisions, but the result continues to require the same boundary and well setbacks for the same type of well between the Spacing Order 139-143 and the order requested herein. Additionally, any section line well continues to require the operator to return to the Board for an exception location.

80 wells requested and reflects an increase in the setbacks both for the boundaries of the

requested DSUs and for the setbacks between wells in the DSUs. The reduction in DSU size

from 2,560-acre to 1,280-acre addresses the size concerns, the time for development objections,

and the speculation that minerals would be tied up longer; accordingly, the 18-month expiration

of the Spacing Orders is no longer being sought by Axia, consistent with Spacing Order 139-134.

The above provisions continue to allow Axia to drill multiple stacked laterals on the W pattern

illustrated in Exhibit N. Although spacing the Subject Lands as four 1 ,280-acre drilling units

increases surface impact and reduces the ultimate quantity of oil and gas available to be drilled

without requiring additional proceeding before this Board- which are additional expenses in the

development of each of these drilling units- the reduced spacing would still open a significant

quantity of oil-in-the-ground to be recovered over a single-well approval. The foregoing

provisions also remove any language for any non-consent penalty in the requested Spacing

Order.

CONCLUSION

In light of the negotiations between the Division, Newfield, and EP that have taken place,

Axia requests the Board reject the objections and enter a Spacing Order on the terms specified in

this Reply.

Dated: May 31,2016

Attorneys/or Petitioner Axia Energy II, LLC

CERTIFICATE OF SERVICE

I hereby certify that, on this 31st day ofMay, 2016, I caused a true and correct copy of the foregoing Response to Objections to be sent via e-mail (where e-mail addresses are indicated) and/or mailed, postage pre-paid, to the following:

Steven F. Alder, Esq. Melissa Reynolds, Esq. Assistant Attorneys General Attorneys for the Division of Oil, Gas And Mining 1594 West North Temple, Suite 300 P.O. Box 145801 Salt Lake City, UT 84114-5801 stevealder@utah. gov mreynolds@u1ah.gov

Phillip Wm. Lear, Esq. Clifford B. Parkinson, Esq. Lear & Lear, PLLC Attorneys for EP Energy E&P Company, L.P. 808 East South Temple Street Salt Lake City, UT 84102 phillip.lear@learlaw.com clifford. parkinson@learlaw .com

Craig E. Peterson, President NARO Rockies 1365 Ambassador Way Salt Lake City, UT 84108-2860

MichaelS. Johnson, Esq. Assistant Attorney General Attorney for the Board of Oil, Gas and Mining 1594 West North Temple, Suite 300 P.O. Box 145801 Salt Lake City, UT 84114-5801 mikejohnson@utah.gov

David P. Bolda, Esq. Beatty & Wozniak, P.C. Attorneys for Newfield Production Company 5406 W. 11000 N., Suite 103-221 Highland, UT 84003 dbolda@bwenergylaw.com