BEFORE THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO
IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN  OPERATIONS IN THE IGNACIO-BLANCO FIELD, LA PLATA COUNTY, COLORADO	) ) ) )	CAUSE NO.   112 ORDER NO.   112-128

REPORT OF THE COMMISSION

                        This cause came on for hearing before the Commission on January 6, 1997, at 8:30 a.m., in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of SG Interests V, Ltd., for an order pooling all non-consenting leased working interests in the drilling and spacing unit consisting of the E½ Section 32, Township 34 North, Range 9 West, N.M.P.M., for the development and operation of the Fruitland Coal seams.

FINDINGS

                        The Commission finds as follows:

                        1.  That SG Interests V, Ltd., as applicant herein, is an interested party in the subject matter of the above-referenced hearing.

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

                        3.  That 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 June 15, 1988, the Commission issued Order No. 112‑60 which established 320‑acre drilling and spacing units for the production of gas and associated hydrocarbons from the Fruitland Coal seams, underlying certain lands in the Ignacio‑Blanco Field including Section 32, Township 34 North, Range 9 West, N.M.P.M., with the units to consist of a governmental half section and the permitted well to be located in the NW¼ and the SE¼ of each section, no closer than 990 feet from the boundaries of the quarter section, nor closer than 130 feet to any interior quarter section line.  Order No. 112-61 was subsequently adopted amending Order No. 112-60 to establish additional field rules for the Fruitland Coal seams.  The E½ of Section 32, Township 34 North, Range 9 West, N.M.P.M., has been established as a drilling and spacing unit for the Fruitland Coal seams.

                        5.  SG Interests V, Ltd. proposes to drill the Ballantine 34-9, #32-2 Well located 1,185 feet FSL and 1.315 feet FEL in the SE¼ SE¼ of Section 32, Township 34 North, Range 9 West, N.M.P.M.  The Ballantine Well will be drilled at a legal location for production from the Fruitland Coal seams.

                        6.  There are no unleased mineral interest owners in the E½ of Section 32.  SG Interests V, Ltd. has acquired leasehold and working interest in two hundred forty (240) acres, or 75% of this 320-acre drilling unit.  Williams Production Company has a leased mineral ownership in eighty (80) acres, or 25% of the unit.  The SG Interests V Ltd. acreage is held by production by the Sutton #1 Well and Sutton No. 1-A in the E½ of Section 32, which are Mesaverde Formation producing wells.

                        7.  Efforts have been made to obtain the voluntary pooling of all interests.  A.F.E.'s and offers to purchase or farm-in have been furnished to non-consenting interests on or around July 12, 1996, and consent has not been given.

                        8.  Based on the facts stated in the application and testimony presented at the administrative hearing, having received no protests, and having been heard by the Hearing Officer on January 2, 1997, and recommended for approval, the Commission should enter an order pooling all interests in the 320-acre drilling and spacing unit herein described in order to insure proper and efficient development of the gas and associated hydrocarbons from the Fruitland Coal seams underlying said unit.

                        9.  That an order of the Commission pooling all interests in said drilling unit is necessary in order to afford each owner of interest in each said drilling unit the opportunity to recover and receive their just and equitable share of the oil and/or gas from the common source of supply underlying said drilling unit.

                        10.  That production obtained from said drilling unit should be allocated to each tract therein on the basis of the proportion that the number of acres in each tract bears to the total number of acres with said drilling unit.

                        11.  That SG Interests V, Ltd., should be designated as the operator for the Ballantine 34-9, No. 32-1 Well to be drilled 1,185 feet FSL and 1,315 feet FEL in the SE¼ SE¼ of Section 32, Township 34 North, Range 9 West, N.M.P.M., for production from the Fruitland Coal seams.

ORDER

                        NOW, THEREFORE IT IS ORDERED, that, 1.  Pursuant to the provisions of §34-60-116, C.R.S. as amended, of the Oil and Gas Conservation Act of the State of Colorado, all interests in the drilling and spacing unit consisting of the E½ of Section 32, Township 34 North, Range 9 West, N.M.P.M., La Plata County, Colorado, are hereby pooled for the development of gas and associated hydrocarbons from the Fruitland Coal seams.

                        2.  The production obtained from said drilling unit shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within said drilling unit; each owner of an interest in said drilling unit shall be entitled to receive his share of the production of the well located on said drilling unit applicable to his interest in said drilling unit.

                        3.  The owner of the unleased tract should be afforded the opportunity to elect whether to participate in the drilling and operation of said well, and pay a proportionate share of the actual costs thereof, which proportionate share shall be determined by dividing the number of acres in each unleased tract to the total number of acres within said drilling unit.

                        4.  Within thirty (30) days from the date of receipt of said A.F.E. by the owner of said tract, such owner shall indicate whether he consents to the cost of the drilling of the well and agrees to participate in such costs.  Such election shall be made in writing either by executing the AFE or similar document.  In the event a written election to participate is not made by said owner within such time period, said owner shall be deemed to have elected not to participate and shall therefore be deemed to be non‑consenting as to the well and be subject to the penalties as provided for by §34‑60‑116 (7).

                        5.  Any non‑consenting unleased mineral owner within the spacing unit shall be treated as the owner of the landowner's royalty to the extent of 12.5% of his or her record title interest, whatever that interest may be, until such time as the consenting owner recovers, only out of the non‑consenting owner's proportionate 87.5% share of production, the costs specified in §34‑60‑116 (7)(b), C.R.S. as amended.  After recovery of such costs, the non‑consenting mineral owner shall then own his proportionate 8/8ths share of the well, surface facilities and production, and then be liable for his proportionate share of further costs incurred in connection with the well as if he had originally agreed to the drilling.

                        6.  The operator of any well drilled on the above described unit shall furnish all non‑consenting owners with a monthly statement of all costs incurred, together with the quantity of oil and gas produced, and the amount of proceeds realized from the sale of production during the preceding month.

                        7.  That SG Interests V, Ltd., shall be designated as the operator for the Ballantine 34-9, No. 32-1 Well to be drilled 1,185 feet FSL and 1,315 feet FEL in the SE¼ SE¼ of Section 32, Township 34 North, Range 9 West, N.M.P.M. for production from the Fruitland Coal seams.

                        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 January, 1997, as of January 6, 1997.

                                                                        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

July 3, 2018