231-7

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 PAPOOSE CANYON FIELD, DOLORES COUNTY, COLORADO

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CAUSE NO. 231

ORDER NO. 231-7

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on October 21, 1985 at 9:00 a.m., in Room 110, State Centennial Building, 1313 Sherman Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of Tenneco Oil Co. for an order pooling all interests in a 160-acre, more or less, drilling and spacing unit consisting of lands in Sections 36 and 25, Township 39 North, Range 20 West, N.M.P.M., Dolores County, Colorado, for the development and operation of the Desert Creek formation for the production of oil underlying said unit, pursuant to 34-60-116 C.R.S., as amended.

FINDINGS

The Commission finds as follows:

1. Tenneco Oil Company, 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 drilling and spacing unit has been established to consist of the following described lands in the Papoose Canyon Field, Dolores County, Colorado:

Township 39 North, Range 20 West, N.M.P.M.

Section 36: Lots 1 and 2 and that portion of Tract 64 lying west of the center line of Section 36, including therein a tract formerly designated as a part of S1/2S1/2 Section 25, T. 39 N., R. 20 W., N.M.P.M.; and that portion of Tract 65 lying north and west of the resurveyed center lines of said Section 36.

5. Effort has been made to obtain the voluntary pooling of all interests in said drilling unit for the development and operation thereof, but that it has not been possible to secure the agreement of all owners of interest in said unit for the voluntary pooling thereof.

6. Applicant is an "interested person" within the meaning of 34-60-116 (6), C.R.S., as amended, of the Oil and Gas Conservation Act of the State of Colorado.

7. In order to insure proper and efficient development of said drilling unit and to promote conservation of the oil and/or gas resources of the State, an order should be made pooling all interests in the 160-acre drilling unit described herein.

8. 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 his just and equitable share of the oil and/or gas from the common source of supply underlying said drilling unit.

9. 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 within said drilling unit.

10. Since there are federal lands within the unit, all interested parties should execute a Communitization Agreement covering the pooled acreage in accordance with the United States Department of the Interior.

ORDER

NOW, THEREFORE, IT IS ORDERED, that: 1. [sic] 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 following described lands in Dolores County, Colorado, are hereby pooled for the development of oil from the Desert Creek formation underlying said unit:

Township 39 North, Range 20 West, N.M.P.M.

2. The production obtained from said drilling unit shall be allocated to each owner therein in the unit on the basis of the proportion that the number of acres in each 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 non-consenting owner should be afforded the opportunity to consent to the drilling of the proposed well on the unit and to elect whether to participate in the drilling and operating of said well, and pay a proportionate share of the actual costs thereof, which proportionate share shall be determined by dividing the number of net mineral acres owned by said unleased mineral owner by the total number of mineral acres in the unit.

4. The operator responsible for drilling the proposed well on the said unit shall prepare an Authorization for Expenditure ("AFE"), which shall be submitted to the non-consenting owner in the unit.

5. Within thirty (30) days from the date of receipt of said AFE by the non-consenting owner, such owner shall indicate whether he consents to the drilling of the well and agrees to participate in the cost thereof. 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 a non-consenting 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.

IT IS FURTHER ORDERED, that since there are federal lands within the unit, all interested parties shall execute a Communitization Agreement covering the pooled acreage in accordance with the United States Department of the Interior.

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 November 1985, as of October 21, 1985.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

Frank J. Piro, Secretary