IN THE MATTER OF THE ESTABLISHMENT OF THE FRONTERA UPPER SAND UNIT IN THE FRONTERA FIELD, CHEYENNE COUNTY COLORADO Cause No. 460 Order No. 460-3

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on May 21, 1990 at 8:30 a.m., in Room 101, State Education Building, 201 East Colfax, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified application of Mull Drilling Company, Inc. for an order authorizing voluntary unit operations with enhanced recovery involving injection of fluids including gas in the Morrow "A" Sand underlying certain lands in Frontera Field, Cheyenne County, Colorado.

FINDINGS

The Commission finds as follows:

1. Mull Drilling Company, Inc., 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. The Morrow "A" formation of Pennsylvanian Age was encountered between the depth of 5110 feet and 5134 feet inclusive in the Lucile White Trust "A" No. 1 well located in the SE/4 SE/4 of Section 12, Township 15 South, Range 42 West, 6th P.M., Cheyenne County, Colorado. 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: S/2 of SW/4; NW/4 of SW/4 Section 18: N/2

Township 15 South, Range 42 West, 6th P.M. Section 12: E/2 Section 13: E/2 of NE/4

5. The terms and conditions provided by the Unit Agreement and Unit Operating Agreement meet the requirements of the statute and are

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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 Hearing Officer 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 Upper Sand Unit of all the oil and gas that is produced from said Unit Area and is saved.

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;

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e. The provisions 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 from the Morrow "A" reservoir underlying said unit area should be allowed in order to prevent waste and to 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 injection well should be well UPRC Elmer Akers No. 2 located in the SW/4 of the SW/4 of Section 7, Township 15 South, Range 41 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 one hundred percent of the costs of the unit operations, and by the owners of one hundred percent of the production 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

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

O R D E R

NOW, THEREFORE IT IS ORDERED, that:

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

2. Said Morrow "A" 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: S/2 of SW/4; NW/4 of SW/4 Section 18: N/2

Township 15 South, Range 42 West, 6th P.M. Section 12: E/2 Section 13: E/2 of NE/4

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

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3. The conduct of operations for the recovery of oil and gas from the Morrow "A" 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 injection well is the UPRC Elmer Akers No. 2 located in the SW/4 SW/4 of said Section 7.

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 "A" 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 Upper Sand Unit described herein above, are hereby rescinded.

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

9. 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

10. That the Frontera Upper Sand Unit shall be effective June 1, 1990.

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.

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ENTERED this day of ,

1990, as of May 21, 1990.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Dennis R. Bicknell, Secretary

Dated at Suite 380 1580 Logan Street Denver, Colorado 80203

1249A

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