232-180

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, THE CODELL- NIOBRARA SPACED AREA AND THE WATTENBERG FIELD, WELD COUNTY, COLORADO

)

CAUSE NOS. 232, 407

and 499

ORDER NOS. 232-180, 407-242,

and 499-32

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 8:30 a.m. on January 7, 1998, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of Hearing, as required by law on the verified amended application of North American Resources Company ("NARCO") for an order to allow the Seymour No. 34-34 Well to be drilled in the center of the SW¼ SE¼ of Section 34, Township 2 North, Range 66 West, 6th P.M., as a third well for production of gas and associated hydrocarbons from the "J" Sand Formation for the 320-acre drilling and spacing unit consisting of the E½ of said Section 34. In the future, the Applicant may recomplete this well to the Dakota Formation for said 320-acre drilling and spacing unit and to the Codell, Niobrara or Sussex Formations for the 80-acre drilling and spacing unit consisting of the SW¼ SE¼ of said Section 34 and to commingle all production with the "J" Sand Formation.

FINDINGS

The Commission finds as follows:

1. North American Resources Company ("NARCO"), 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 Order No. 407 1, the Commission established 80 acre drilling and spacing units for the production of oil and/or gas and associated hydrocarbons from the Codell Formation. Wells shall be located in the center of the 40 acre tract or quarter-quarter section with a tolerance of 200 feet in any direction. In Order Nos. 407-10 and 407-13, the Commission amended Order No. 407-1 to include production from the Niobrara Formation in certain lands and to allow the downhole commingling of production from the Codell and Niobrara Formations, including Section 34, Township 2 North, Range 66 West 6th P.M.

5. In Order Nos. 407-66 and 232-47, the Commission, among other things, allowed recompletion to shallower zones, the downhole commingling of production from the "J" Sand Formation with production from the Codell and Niobrara Formations, and approval of an allocation method for commingled production.

6. In Order No. 499-1, the Commission established 320-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Dakota Formation in certain lands, with the 320-acre drilling and spacing units to be identical to those previously established for the "J" Sand Formation under Cause No. 232, with the permitted wells to be located in the NW¼ and the SE¼ of the section and no closer than 990 feet from the boundaries of the quarter section. In Order Nos. 499-15, 232-89, 407-125, 493-22 and 496-3, the Commission allowed the commingling of production from the Dakota, "J" Sand, Codell, Niobrara, Sussex and Shannon Formations.

7. At the time of the administrative hearing, the applicant testified that the Seymour No. 34-34 Well is proposed to be drilled no closer than 660 feet FSL and 1,980 feet FEL of Section 34, Township 2 North, Range 66 West, 6th P.M., which is in a legal location for the Codell and Niobrara Formations.

8. Testimony and evidence was presented that average gas recovery in the four (4) “J” Sand Formation wells surrounding the Seymour No. 34-34 Well is twenty-eight percent (28%) of gas in place in the 160 acre units.

9. That in order to prevent waste and protect the correlative rights an additional well is necessary to recover remaining "J" Sand Formation reserves.

10. The applicant agrees to request Commission approval not before six (6) months from the date production is obtained from the “J” Sand Formation to recomplete the wells to the Dakota Formation and the Niobrara, Codell and Sussex Formations and commingle production from these formations with production from the “J” Sand Formation.

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

12. Based on the facts stated in the application, having received no protests and having been heard by the Hearing Officer who recommends approval of the application, an order of the Commission should be entered amending Order Nos. 232-89, 407-125, 499-15 and 493-22 to allow the Seymour No. 34-34 Well to be drilled in the center of the SW¼ SE¼ of Section 34, Township 2 North, Range 66 West, 6th P.M., as a third well for production of gas and associated hydrocarbons from the "J" Sand Formation for the 320-acre drilling and spacing unit consisting of the E½ of said Section 34. In the future, the Applicant may recomplete this well to the Dakota Formation for said 320-acre drilling and spacing unit and to the Codell, Niobrara or Sussex Formations for the 80-acre drilling and spacing unit consisting of the SW¼ SE¼ of said Section 34 and and [sic] to commingle all production with the "J" Sand Formation.

ORDER

NOW, THEREFORE, IT IS ORDERED, that Order Nos. 232-89, 407-125, 499-15 and 493-22 are hereby amended to allow the Seymour No. 34-34 Well to be drilled in the center of the SW¼ SE¼ of Section 34, Township 2 North, Range 66 West, 6th P.M., as a third well for production of gas and associated hydrocarbons from the "J" Sand Formation for the 320-acre drilling and spacing unit consisting of the E½ of said Section 34. In the future, the Applicant may recomplete this well to the Dakota Formation for said 320-acre drilling and spacing unit and to the Codell, Niobrara or Sussex Formations for the 80-acre drilling and spacing unit consisting of the SW¼ SE¼ of said Section 34 and to commingle all production with the "J" Sand Formation.

IT IS FURTHER ORDERED, that the Applicant shall request Commission approval not before approximately six (6) months from the date production is obtained from the "J" Sand Formation to recomplete the wells to the Dakota Formation and the Niobrara and Codell Formations and commingle production from these formations with production from the “J” Sand Formation.

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 3rd day of January, 1998, as of January 7, 1998.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

Patricia C. Beaver, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

January 29, 1998