REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on February 21, 1986 at 9:00 A.M., in Room 110 State Centennial Building, 1313 Sherman Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified application of Cities Service Oil & Gas Corporation for an order granting an exception to the permitted well location as provided for by Order No. 426-1 for a well to be drilled in the NE/4SE/4 Section 34, Township 13 South, Range 48 West, 6th P.M. and that it be the permitted well for the unit consisting of the E/2SE/4 of said section.

The Commission finds as follows:

1. Cities Services Oil & Gas 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 February 18, 1985, the Commission authorized Order No. 426-1 to be issued which established 80-acre drilling and spacing units for the production of oil and associated hydrocarbons from the Morrow formation underlying certain lands in the Mt. Pearl Field. The units consist of the E/2 and W/2 or the N/2 and S/2 of each quarter section according to the governmental survey. The permitted well is at a location in the center of the NW/4 and SE/4 of each quarter section with a tolerance of 200 feet in any direction. The E/2SE/4 Section 34, Township 13 South, Range 48 West, 6th P.M. has been designated an 80-acre unit.

5. A well has been drilled at the permitted location in the SE/4SE/4 Section 34, Township 13 South, Range 48 West, 6th P.M. and was plugged and abandoned as a dry hole.

6. Testimony presented at the hearing indicates that in order for the applicant to obtain his share of the production from the unit and to protect correlative rights, an exception to the permitted well location as provided for by Order No. 426-1 should be allowed for a well to be drilled in the NE/4SE/4 Section 34, Township 13 South, Range 48 West, 6th P.M., Mt. Pearl Field, Cheyenne County, Colorado, and that it be the permitted well for the unit consisting of the E/2SE/4 of said Section 34.

7. The Director should meet with operators in the Mt. Pearl Field in order to adopt a policy of restriction of production from the Morrow formation for wells drilled as an exception to the permitted well location in the Mt. Pearl Field. Such policy, when approved by the Commission, should apply to the well described hereinabove.

ORDER

NOW, THEREFORE, IT IS ORDERED, that an exception to the permitted well location as provided for in Order No. 426-1 is hereby granted for a well to be drilled at a location in the NE/4SE/4 Section 34, Township 13 South, Range 48 West, 6th P.M., Mt. Pearl Field, Cheyenne County, Colorado, and that it be the permitted well fortheunit consisting of the E/2SE/4 of said Section 34.

IT IS FURTHER ORDERED, that the Director shall meet with the operators in the Mt. Pearl Field in order to adopt a policy of restriction of production from the Morrow formation for wells drilled as an exception to the permitted well location in the Mr. Pearl Field. Such policy when approved by the Commission shall apply to the well described hereinabove.

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

ENTERED this 12th day of March 1986, as of February 21, 1986.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary

(426-5)