IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE MCCLAVE FIELD, KIOWA COUNTY, COLORADO Cause No. 105 Order No. 105-32

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 8:30 a.m. on November 21, 1994, in Room 318, State Centennial Building, 1313 Sherman Street, Denver, Colorado, on the application of D.E.A. Johnson, Inc. for an order allowing a well to be drilled at an exception location 1980 feet FSL and 660 feet FWL in the NW1/4 SW1/4 of Section 27, Township 20 South, Range 48 West, 6th P.M., for production from the McClave Sand, for the 640-acre drilling and spa cing unit consisting of said Section 27.

FINDINGS

The Commission finds as follows:

1. D.E.A. Johnson, Inc., as applicant herein, is an interested party in the subject matter of the above-referenced matter.

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 May 15, 1957, the Commission issued Order No. 105-1 which established 640-acre drilling and spacing units for the production of oil and associated hydrocarbons from the McClave Sand underlying certain lands in the McClave Field, with the units to consist of a governmental section, with the permitted well to be located no closer than 990 feet from the center of the drilling and spacing unit upon which it is located. Subsequent Order No. 105-2 incl uded additional lands under the McClave Field, including Section 27, Township 20 South, Range 48 West, 6th P.M.

5. The Tempel No. A-1 Well was drilled in 1978 in the NW1/4 NW1/4 of Section 27, Township 20 South, Range 48 West, 6th P.M., for production from the McClave Sand and was plugged and abandoned in 1994.

6. Geological evidence presented at the administrative hearing indicated that the optimum location to obtain production would require locating a well where riverbed sand development is present. Engineering evidence indicated that approximately one (1) billion cubic feet of gas may remain under Section 27 and that a well located in the NW1/4 SW1/4 of said Section 27 is necessary in order to recover all the hydrocarbons in the McClave Sand underlying the 640-acre drilling and spacing unit.

7. That in order to protect correlative rights and to prevent waste, the Tempel No. 13-27 Well should be authorized to be drilled at an exception location 1980 feet FSL and 660 feet FWL in the NW1/4 SW1/4 of Section 27, Township 20 South, Range 48 West, 6th P.M., for production from the McClave Sand, for the 640-acre drilling and spacing unit consisting of said Section 27.

8. Based on the facts presented at the administrative hearing, and having received no protests to the application, the Hearing Officer recommends approval of the application. The Commission should approve the request and amend Order No. 105-1 to allow an exception well to be drilled and completed for production from the McClave Sand in the NW1/4 SW1/4 of Section 27, Township 20 South, Range 45 West, 6th P.M.

O R D E R

NOW, THEREFORE, IT IS ORDERED that Order No. 105-1 is hereby amended and the Tempel No. 13-27 Well is authorized to be drilled at an exception location 1980 feet FSL and 660 feet FWL in the NW1/4 SW1/4 of Section 27, Township 20 South, Range 48 West, 6th P.M., for production from the McClave Sand, for the 640-acre drilling and spacing unit consisting of said Section 27.

IT IS FURTHER ORDERED, that D.E.A. Johnson, Inc. shall submit geological and engineering evidence including initial reservoir pressure data, pressure build up data, and daily initial production data, for review by Hearing Officer six (6) months from the date the Tempel No. 13-27 Well is completed.

IT IS FURTHER ORDERED, that should a commercial well be completed at the location set forth above, the Commission shall, upon application of any interested person, take such action as will offset any advantage which the person securing the exception may have over other procedures by reason of the drilling of the well as an exception location.

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 November 21, 1994.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary Dated at Suite 801 1120 Lincoln Street Denver, Colorado 80203 December 21, 1994 ??

(105#31)

(105#32)