BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER TO GOVERN OPERATIONS IN THE GIBSON           )           CAUSE NO. 1

GULCH FEDERAL UNIT, GARFIELD COUNTY, COLORADO              )           ORDER NO. 1-69

REPORT OF THE COMMISSION

                        This cause came on for hearing before the Commission on April 21, 1997, at 8:30 a.m. in Suite 801, the Chancery  Building, 1120 Lincoln Street, Denver, Colorado, pursuant to the Applications of Barry & Heather Stout and Vessels Oil & Gas Company for matter concerning operations of the Gibson Gulch Federal Unit No. 14-19 Well located in the SE¼ SW¼ of Section 19, Township 6 South, Range 91 West, 6th P.M.

FINDINGS

                        The Commission finds as follows:

                        1.  That Barry & Heather Stout and Vessels Oil & Gas Company, as applicants herein, are interested parties in the subject matter of the above‑referenced hearing.

                        2.   The Commission has jurisdiction over the subject matter and of the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order.

                        3.  In March, 1996, Barry & Heather Stout ("Stout") filed an application with the Commission seeking the Commission's approval of a state drilling and spacing unit, pursuant to §34-60-116, C.R.S., which would include the Gibson Gulch Unit No. 14-19 Well and the Stout Acreage which consists of 26.34 acres.  The size and configuration of the said spacing unit were not made clear in the application.  In Order No. 1-63, issued October 15, 1996, the Commission dismissed the application due to lack of appearance by the Applicant.

                        4.  On December 16, 1996, and amended on March 27, 1997, Barry & Heather Stout filed an application with the Commission for an order to establish a 40-acre drilling and spacing unit for the Gibson Gulch Unit No. 14-19 Well, a finding by the Commission that the Gibson Gulch Unit No. 14-19 Well is located in violation of Commission Rule 316. (now Rule 318.), and the imposition of fines.

                        5.  On December 27, 1996, Vessels Oil & Gas Company filed with the Commission a verified application requesting, among other things, that the Commission enter an Order: 1) declaring that the Federal Gibson Gulch Unit II, and specifically the Third Participating Area as the participating area under the Unit documents contracts or expands from time to time, meets the standards necessary for unit operations pursuant to §34-60-118, C.R.S. and that operations within such participating areas which are in accordance with federal unit requirements constitute proper operations for purposes of state law; 2) accepting the Gibson Gulch Unit No. 14-19 Well, and any and all other wells within the Third Participating Area which are drilled in accordance with the Unit Documents, as approved unit wells; and 3) effective as of the date of first production from the Gibson Gulch Unit No. 14-19 Well, allocating 13.17/3,421.66 of production of oil and gas from the Third Participating Area, as unitized, to the Stout Mineral acreage and providing that Stout and his successors and assigns are entitled to 1/8th of 13.17/3,421.66 of production from all other wells, if any, which may produce the Mesaverde Formation from within the Third Participating Area.

                        6.  On December 31, 1996, Barry Stout filed with the Commission a protest to the Vessels application.

                        7.  On February 4, 1997, the Bureau of Land Management filed an intervention and protest to this matter.

                        8.  After testimony was presented by Stout and Vessels at the February 10, 1997 hearing, the Commission continued this matter to the April hearing and encouraged negotiation between the parties.

                        9.  On April 10, 1997, Vessels filed the Director a written request for a variance under Rule 502.b. to permit a well location at a future site in Lot 3 (N½ NW¼) of Section 30, Township 6 South, Range 91 West, 6th P.M.

                        10.  On April 11, 1997, the Director granted an order for variance to Rules 603.a.(1). and 603.a.(2).

                        11.  On April 18, 1997, Stout and Vessels filed with the Commission a “Stipulation and Joint Motion for Dismissal of Actions with Prejudice and Mutual Withdrawal of Applications.”

                        12.  At the time of the April 21, 1997 hearing, the Commission unanimously voted to grant the Joint Motion for Dismissal with Prejudice.

 ORDER

                        NOW, THEREFORE, IT IS ORDERED, that the Colorado Oil and Gas Conservation Commission hereby grants the parties’ joint motion to dismiss, and dismisses with prejudice the applications of Barry & Heather Stout and Vessels Oil & Gas Company governing operations in the Gibson Gulch Federal Unit.

                        IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective on the date the order is entered.

                        IT IS FURTHER ORDERED, that the Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.

                        ENTERED this                  day of May, 1997, as of April 21, 1997.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                             OF THE STATE OF COLORADO

                                                                        By                                                                         

                                                                                 Patricia C. Beaver, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado  80203

May 9, 1997