REPORT OF THE COMMISSION

TO ALL INTERESTED PARTIES AND TO WHOM IT MAY CONCERN:

This cause came on for hearing before the Commission on March 18, 1994 at 8:30 a.m., in Room 318, State Centennial Building, 1313 Sherman Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of Stewart Petroleum Corporation for an order to extend the field rules in the Shire Gulch Field for additional lands, and to allow the downhole commingling of production of oil, gas, and associated hydrocarbons from the Coz zette and Corcoran Formations underlying said lands.

FINDINGS

The Commission finds as follows:

1. Stewart Petroleum Corporation, as applicant herein, is an interested party in the subject matter of the above-referenced hearing.

2. Due notice of the time, place and purpose of the hearing has been given in all respects as required by law.

3. The Commission has jurisdiction over the subject matter embraced in said Notice, and of the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order.

4. On January 15, 1979, the Commission issued Order No. 347-1 which established 160-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Cozzette and Corcoran Formations, underlying certain lands in the Shire Gulch Field, Mesa County, with the units to consist of a governmental quarter section and the permitted well to be located no closer than 600 feet to the boundaries of the unit in which it is located. Orde r No. 347-4 included additional lands under the field rules of the Shire Gulch Field for the Corcoran Formation.

5. On February 22, 1994, the Commission issued Order No. 347-6 which established 160-acre exploratory units for the production of gas and associated hydrocarbons from the Cozzette and Corcoran Formations, underlying certain lands in the Shire Gulch Field, Mesa County, with the units to consist of a governmental quarter section and the permitted well to be located no closer than 600 feet to the boundaries of the unit in which it is located. Further, the order approved the downhole commingling of production from the Cozzette and Corcoran Formations.

6. That letters of support were filed with the Commission by Barrett Resources Corporation and Louis Dreyfus Natural Gas Corporation.

7. That protests were filed with the Commission by Koch Exploration Company and the Bureau of Land Management, and a request for continuance was filed by Celsius Energy Company.

8. That prior to the administrative hearing, protests and the request for continuance were withdrawn and after testimony was presented at the administrative hearing, the Hearing Officers were prepared to recommend to the Commission that the application be approved.

9. That prior to the hearing, Stewart Petroleum Corporation requested that the hearing be continued for the NW1/4 of Section 17, Township 9 South, Range 97 West, 6th P.M.

10. That in order to prevent the waste of oil and gas, as defined by law; to protect the correlative rights of all parties concerned; to prevent the drilling of unnecessary wells, and to insure proper and efficient development and promote conservation of the oil and gas resources of the State, an order should be made establishing a 160-acre drilling and spacing unit for the production of gas and associated hydrocarbons from the Cozzette and Corcoran For mations, a common source of supply underlying the lands defined herein; that said unit should consist of a quarter section, according to the governmental survey thereof, with the permitted well to be located no closer than 600 feet to the boundaries of the unit in which it is located.

Township 9 South, Range 97 West, 6th P.M. Section 7: N1/2 and NW1/4 Section 18: NW1/4 and SW1/4 Section 19: NW1/4 and SW1/4

11. Based on the facts stated in the verified application, having continued certain lands in the application, and having been heard by the Hearing Officers on March 18, 1994, the Hearing Officers recommend that the Commission enter an order establishing 160-acre drilling and spacing units for production from the Cozzette and Corcoran Formations, for the lands described in Finding 6, and allow the downhole commingling of production from the Cozzette and Corcoran Formations.

O R D E R

NOW, THEREFORE IT IS ORDERED, that, the field rules for the Shire Gulch Field are hereby extended to establish 160-acre drilling and spacing units for production from the Cozzette and Corcoran Formations for the below-listed lands; with the permitted well to be located no closer than 600 feet to the boundaries of the unit in which it is located.

Township 9 South, Range 97 West, 6th P.M. Section 7: N1/2 and NW1/4 Section 18: NW1/4 and SW1/4 Section 19: NW1/4 and SW1/4

IT IS FURTHER ORDERED, that the downhole commingling of production from the Cozzette and Corcoran Formations is hereby approved.

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith.

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 , 1994, as of March 18, 1994.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary

Dated at Suite 380 1580 Logan Street Denver, Colorado 80203 April 1, 1994 ??

(347#7)