REPORT OF THE COMMISSION

This cause Came on for hearing before the Commission on May 19, 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 Commission's own motion to consider approval of a restriction policy for wells drilled as exceptions in the spaced area of the Mt. Pearl Field, Cheyenne County, Colorado.

FINDINGS

The Commission finds as follows:

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

2. 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. Only one well will be allowed to produce.

3. On February 21, 1986, Order No. 426-5 was authorized to be issued by which an exception to the permitted wells location was granted to Cities Service Oil and Gas Corporation 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. In addition, the Director was directed to meet with operators in the Mt. Pearl Field to formulate a policy of production restriction from the Morrow formation for wells drilled as exceptions to the permitted well location. Such policy, if approved, should apply to the exception well described herein.

4. As a result of such a meeting held on March 13, 1986 it was recommended the Commission consider approval of a restriction policy for exception wells in the spaced area of the Mt. Pearl as follows:

1. If the first well drilled on a drilling and spacing unit is an exception it should be allowed 50% of the average production of the offset wells.

2. A second well drilled on a drilling and spacing unit as an exception should be allowed 75% of the average production of the offset wells. Only one well will be allowed to produce.

3. A minimum production of 100 barrels oi/day for any exception well should be allowed.

5. The restriction policy should be approved by the Commission and in the absence of a request by an applicant, or a protestant, or an order of the Commission to the contrary, such policy should apply to wells drilled as exceptions to the permitted well location as provided for in Order No. 426-1 for which approval is granted by the Commission including the well drilled as an exception and described in Finding 3 herein.

ORDER

NOW, THEREFORE, IT IS ORDERED, that in the absence of a request by an applicant, or a protestant or an order of the Commission, the following production restriction policy shall henceforth apply to wells drilled in the Mt. Pearl spaced area as exceptions to the permitted well location as provided for in Order No. 426-1 for which approval is granted by the Commission:

1. If the first well drilled on a drilling and spacing unit is an exception it should be allowed 50% of the average production of the offset wells.

2. A second well drilled on a drilling and spacing unit as an exception should be allowed 75% of the average production of the offset wells. Only one well will be allowed to produce.

3. A minimum production of 100 barrels oi/day for any exception well should be allowed.

IT IS FURTHER ORDERED, that the restriction policy described in the above order shall apply to the well drilled by Cities Service Oil & Gas Co. as an exception, located in the NE/4SE/4 Section 34, Township 13 South, Range 48 West, 6th P.M. which was approved by the Commission by Order No. 426-5.

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

ENTERED this 10th day of June 1986, as of May 19, 1986.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary 2 (426-6)