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 WATTENBERG GAS SPACED AREA, ADAMS COUNTY, COLORADO	) ) ) )	CAUSE NO.  232 ORDER NO. 232-147

REPORT OF THE COMMISSION

                        This cause came on for hearing before the Commission on March 20, 1995, at the La Plata County Fairgrounds, Extension Building, Durango, Colorado, for an order to establish 160-acre drilling and spacing units for the "J" Sand Formation covering Section 16, Township 1 South, Range 65 West, 6th P.M.

FINDINGS

                        The Commission finds as follows:

                        1.  North American Resources 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.  In Cause No. 232, the Commission established 320-acre drilling and spacing units with said units to consist of the N½ and S½ or the E½ and W½ of a governmental section for production from the "J" Sand Formation and with the authorized well to be located in the NE¼ and the SW¼ of each section no closer than 990 feet from the boundaries of the quarter section.  By Order No. 232-20, the Commission authorized the drilling of a second well for each 320-acre drilling and spacing unit with the additional well to be located no closer than 990 feet from the boundaries of the quarter section upon which it is located, including Section 16, Township 1 South, Range 65 West, 6th P.M.

                        5.  Drilling permits for three existing wells in said Section 16 do not designate 320-acre drilling and spacing units or offer conflicting spacing units.  Proceeds from the three wells are being paid as if on 160-acre drilling and spacing unit existed.  Proceeds from the other existing wells in Section 16 have never been paid to the lessor of the NW¼ of Section 16.

                        6.  Applicant desires to drill a well in the NW¼ of Section 16, Township 1 South, Range 65 West, 6th P.M.

                        7.  This matter was heard by the Hearing Officer who recommends approval based upon the testimony presented at the administrative hearing that 160-acre drilling and spacing units are not smaller than the maximum area that can be efficiently and economically drained.

                        8.  An order of the Commission should be entered rescinding the 320-acre drilling and spacing units established in Section 16 and establishing 160-acre drilling and spacing units for production from the "J" Sand Formation consisting of the governmental quarter section, with the permitted well to be located no closer than 990 feet to the quarter section lines, in Section 16, Township 1 South, Range 65 West, 6th P.M.

ORDER

                        NOW, THEREFORE, IT IS ORDERED, that Order No. 232-1 is hereby amended to rescind 320-acre drilling and spacing units and establish 160-acre drilling and spacing units for production from the "J" Sand Formation, consisting of the governmental quarter section, with the permitted well to be located no closer than 990 feet to the quarter section lines, in Section 16, Township 1 South, Range 65 West, 6th P.M.

                        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 , 1995, as of March 20, 1995.

                                                                        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

April 13, 1995