REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on June 16, 1989 at 8:30 a.m. in Room 101, State Education Building, Denver, Colorado , after giving Notice of Hearing as required by law, on the verified application of Union Pacific Resources Company, for an order authorizing involuntary unit operations with enhanced recovery involving injection of fluids including gas in the Morrow "B" Sand underlying certain lands in Frontera Field, Cheyenne County, Colorado.

FINDINGS

The Commission finds as follows:

1. Union Pacific Resources Company, as applicant herein, is as 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. The Morrow "B" formation of Pennsylvanian Age was encountered in the interval between the depths of 5142 feet and 5196 feet in well #2 Maul 31-24 located in the NW/4 NE/4 Section 24, Township 15 South, Range 42 West, 6th P.M. Said Morrow formation, as so encountered, is a common source of supply and has been defined and determined by drilling to be productive underlying the following described lands in Cheyenne County, Colorado, to-wit:

Township 15 South, Range 41 West, 6th P.M. Section 7: All Section 19: All Section 18: All

Township 15 South, Range 42 West, 6th P.M. Section 12: All Section 24: All Section 13: All

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5. The terms and conditions provided by the Unit Agreement and Unit Operating Agreement meet the requirements of the statute and are just and reasonable to all interests contained within said unit area. The plan for unit operations as presented by the Applicant, providing for the conduct of operations to recover oil and gas is necessary to increase the ultimate recovery and the value of the estimated additional recovery of oil and gas exceeds the estimated additional cost incident to conducting such operations.

6. The provisions contained in said Unit Agreement and Unit Operating Agreement have been reviewed by the Commission staff and found to be just and reasonable as required by 34-60-114(4) C.R.S. 1973, as amended and include the following:

a. The description of the pool to be so operated;

b. The nature of said operation;

c. The allocation to the separately owned tracts in the Frontera Unit of all the oil and gas that is produced from said Unit Area and is saved. - 2 -(460-2)

d. The provision for the credits and charges to be made in the adjustment among the owners in the Frontera Unit for their respective investments in wells, tanks, pumps, machinery, materials, and equipment contributed to the unit operations;

e. The provision providing how the costs of unit operations, including capital investments, shall be determined and charged to the separately owned tracts, and how said costs shall be paid, including the provision providing when, how, and by whom the unit production allocated to an owner who does not pay the share of the cost of unit operations charged to such owner, or the interest of such owners, may be sold and the proceeds applied to the payment of such costs;

f. The provision for the supervision and conduct of the unit operations, in respect to which each person shall have a vote with a value corresponding to the percentage of the costs of unit operations chargeable against the interest of such person; and

g. The time when the unit operations shall commence, and the manner in which, and the circumstances under which the unit operations shall terminate.

7. Re-injection of produced gas and water from the Morrow "B" reservoir underlying said unit area should be allowed in order to prevent waste and promote conservation and maintain pressure maintenance in the reservoir. In addition, outside sources of gas and water may be used when deemed necessary.

8. The initial gas injection well should be well Mull #2 31-24 located in the NE/4 NW/4 of Section 24, Township 15 South, Range 42 West, 6th P.M. All injection wells should be approved by the Director in accordance with the rules and regulations of the Commission prior to any injection occurring.

9. The plan for unit operations has been approved by those persons required to pay at least eighty percent of the costs of the unit operations, and by the owners of at least eighty percent of the production

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proceeds.

10. The spacing provisions and restrictions on production as established by Order No. 460-1 as they pertain to the lands in the Frontera Field, described herein above, should be rescinded, upon approval of the plan for unit operations by the Commission.

11. The below listed lands should remain under the provisions of orders in Cause No. 460:

Township 15 South, Range 41 West, 6th P.M. Section 30: All

Township 15 South, Range 42 West, 6th P.M. Section 25: All - 4 -(460-2)

12. The following described wells should be excluded from the unit:

EXCLUDED WELLS

Well Name Footages Section TWP RGE

Mull #3 Wallace 32-12 660 FSL 1980 FEL 12:SW/4 NE/4 15S 42W UPRC #6 Temple 12-13 1981 FNL 655 FWL 13:SW/4 NW/4 15S 42W UPRC #8 Temple 42-13 2180 FNL 860 FEL 13:SE/4 NE/4 15S 42W UPRC #6 Maul 14-13 661 FSL 884 FWL 13:SW/4 SW/4 15S 42W Mull #5 32-24 1980 FWL 1922 FEL 24:SW/4 NE/4 15S 42W Mull #6 Maul 43-24 2180 FSL 612 FEL 24:NE/4 SE/4 15S 42W Phillips Akers C-1 660 FNL 660 FEL 7:NE/4 N/2 15S 41W UPRC #1 Elmer Akers 24-7 660 FSL 660 FEL 7:SE/14 S/2 15S 41W UPRC #2 Elmer Akers 14-7 860 FSL 460 FWL 7:SW/4 S/2 15S 41W UPRC #3 Elmer Akers 13-7 2060 FSL 660 FWL 7:NW/4 S/2 15S 41W Mull #1 State Line Ranch 11-18 660 FNL 660 FWL 18:NW/4 N/2 14S 41W Mull #3 State Line Ranch 13-18 1789 FSL 460 FWL 18:NW/4 S/2 15S 41W UPRC #2 White 23-19 1980 FSL 628 FEL 19:NE/4 S/2 15S 41W UPRC #6 White 21D-19 1000 FNL 950 FEL 19:NE/4 N/2 15S 41W UPRC #1 White 12-19 1980 FNL 660 FWL 19:SW/4 N/2 15S 41W

O R D E R

NOW, THEREFORE, IT IS ORDERED, that:

1. The Unit Agreement and Unit Operating Agreement covering the Morrow "B" formation of Pennsylvanian Age underlying lands in the Frontera Unit/Frontera Field are hereby approved as being in the public interest for conservation.

2. Said Morrow "B" formation reservoir is a common source of supply and underlies the following described lands in Cheyenne County, Colorado, to-wit:

Township 15 South, Range 41 West, 6th P.M. Section 7: All Section 19: All Section 18: All

Township 15 South, Range 42 West, 6th P.M. Section 12: All Section 24: All Section 13: All

and such area shall hereafter be known as the Frontera Unit, Frontera Field.

3. The conduct of operations for the recovery of oil and

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gas from the Morrow "B" formation underlying said Unit Area is hereby approved as being necessary to increase the ultimate recovery from such reservoir and prevent waste.

4. A re-injection project of produced gas and water from the unit reservoir, as well as injection of gas and water from outside sources when deemed necessary, as presented by the Applicant is hereby approved and the operator is authorized to commence and maintain such a project. The initial gas injection well is the Mull #2 31-24 located in the NE/4 NW/4 of said Section 24.

5. All injection wells shall be approved by the Director in accordance with the rules and regulations of the Commission prior to any injection occurring.

6. The conduct of operations for the recovery of oil and gas from the Morrow "B" formation underlying said unit area is hereby approved as being necessary to increase the ultimate recovery from such reservoir and prevent waste.

7. The spacing provisions as established by Order No. 460-1 as they pertain to the lands in the Frontera Unit described herein above, are hereby rescinded. - 6 -(460-2)

8. The wells listed and described in Finding 12 herein are excluded from the Frontera Unit.

9. The restrictions of production as established by Order No. 460-1 as they pertain to the wells in the Frontera Unit described herein above, shall be rescinded upon the initial injection of gas and notification to the Commission of the injection of gas.

10. The below listed lands shall remain under the provisions of orders in Cause No. 460:

Township 15 South, Range 41 West, 6th P.M. Section 30: All

Township 15 South, Range 42 West, 6th P.M. Section 25: All

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith as all parties agreed to be bound by the oral orders of the Commission.

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 ,

1989 as of June 16, 1989.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Dennis R. Bicknell, Secretary

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