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. 105-38

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 8:30 a.m. on June 3, 1998, Rifle Town Hall, 202 Railroad Avenue, Rifle Colorado, on the application of Thomas L. Spring for an order to allow a well to be drilled and completed at an exception location for production of oil and associated hydrocarbons from the McClave Sand, for the 640-acre drilling and spacing unit consisting of said Section 13.

FINDINGS

The Commission finds as follows:

1. Thomas L. Spring, 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 13, Township 20 South, Range 49 West, 6th P.M.

5. On April 24, 1998, Thomas L. Spring filed with the Commission an application for an order to allow a well to be drilled and completed at an exception location 600 feet FNL and 600 feet FEL in the NE1/4 NE1/4 of Section 13, Township 20 South, Range 49 West, 6th P.M., for production of oil and associated hydrocarbons from the McClave Sand, for the 640-acre drilling and spacing unit consisting of said Section 13. Two (2) wells have been drilled in said drilling and spacing unit, the first being the Lynn A #1 Well located in the SE1/4 NW1/4, which was completed as a producer from the McClave Sand in November 1956. This well was plugged and abandoned in 1992 due to a casing leak. The second well drilled was the Continental Oil Company #1 Abrams Well located in the NW1/4 SE1/4, which was drilled and completed as a dry hole in June, 1958. This well was not drilled deep enough to penetrate the McClave Sa nd.

6. Evidence and testimony presented at the administrative hearing indicated that the Lynn A #1 Well located in the SE1/4 NW1/4, which was completed as a producer from the McClave Sand in November 1956, was plugged and abandoned prematurely in 1992 due to formation damage suffered as a result of a casing leak, leaving additional reserves estimated at 1 BCFG remaining in place.

7. That in order to protect correlative rights, to prevent waste, and to recover additional reserves, a well should be authorized to be drilled at an exception location 600 feet FNL and 600 feet FEL in the NE1/4 NE1/4 of Section 13, Township 20 South, Range 49 West, 6th P.M., for production of gas and associated hydrocarbons from the McClave Sand, for the 640-acre drilling and spacing unit consisting of said Section 13.

8. At the time of the hearing, the Applicant agreed to be bound by oral order of the Commission.

9. 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 of gas and associated hydrocarbons from the McClave Sand in Section 13, Township 20 South, Range 49 West, 6th P.M.

ORDER

NOW, THEREFORE, IT IS ORDERED that Order No. 105-1 is hereby amended and a well is authorized to be drilled at an exception location 600 feet FNL and 600 feet FEL in the NE1/4 NE1/4 of Section 13, Township 20 South, Range 49 West, 6th P.M., for production of gas and associated hydrocarbons from the McClave Sand, for the 640-acre drilling and spacing unit consisting of said Section 13.

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 June, 1998, as of June 3, 1998.

GAS AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Dated at Suite 801 Patricia C. Beaver, Secretary 1120 Lincoln Street Denver, Colorado 80203 June 10, 1998 ??

(105#38)