232-206

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

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CAUSE NOS. 232, 407 and 499

ORDER NOS. 232-206, 407-266,

and 499-52

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 8:30 a.m. on February 9, 1998, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of Hearing, as required by law on the verified application of HS Resources, Inc., for an order to allow the HSR Kobobel No. 16-20A Well to be drilled at an exception location in the center of the SE¼ SE¼ of Section 20, Township 2 North, Range 68 West, 6th P.M., with a tolerance of 200 feet, for production of gas and associated hydrocarbons from the "J" Sand Formation for the 320-acre drilling and spacing unit consisting of the S½ of Section 20. 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 an 80-acre drilling and spacing unit and commingle such production with the "J" Sand Formation.

FINDINGS

The Commission finds as follows:

1. HS Resources, Inc., 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 for the production of gas from the "J" Sand Formation in the Wattenberg Field with one well allowed for each unit to be located in the NE¼ and SW¼ and no closer than 990 feet to the boundaries of the quarter section. On August 21, 1979, the Commission issued Order No. 232-20 which allowed a second well to be drilled on each 320-acre unit, including Section 20, Township 2 North, Range 68 West [sic] 6th P.M.

5. 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 20, Township 2 North, Range 68 West [sic] 6th P.M.

6. 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.

7. 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, including Section 20, Township 2 North, Range 68 West [sic] 6th P.M.

8. Testimony and evidence presented at the administrative hearing indicates that the surface location of the Kobobel No. 16-20A Well falls into a gravel pit and thus the well will be directionally drilled with the bottom hole location for the "J" Sand Formation at a legal location for the Codell and Niobrara Formations.

9. This matter was heard by the Hearing Officer who recommends approval based upon the testimony presented at the administrative hearing that an exception to the permitted well location is necessary to recover additional reserves from the "J" Sand Formation and from the Codell and Niobrara Formations.

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

11. 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 for an order to allow the HSR Kobobel No. 16-20A Well to be drilled at an exception location in the center of the SE¼ SE¼ of Section 20, Township 2 North, Range 68 West, 6th P.M., with a tolerance of 200 feet, for production of gas and associated hydrocarbons from the "J" Sand Formation for the 320-acre drilling and spacing unit consisting of the S½ of Section 20. 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 an 80-acre drilling and spacing unit and commingle such production with the "J" Sand Formation.

ORDER

NOW, THEREFORE, IT IS ORDERED, that Order Nos. 407-1 and 407-7 are hereby amended allowing the HSR Kobobel No. 16-20A Well to be drilled at an exception location in the center of the SE¼ SE¼ of Section 20, Township 2 North, Range 68 West, 6th P.M., with a tolerance of 200 feet, for production of gas and associated hydrocarbons from the "J" Sand Formation for the 320-acre drilling and spacing unit consisting of the S½ of Section 20. 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 an 80-acre drilling and spacing unit and commingle such production with the "J" Sand Formation.

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 10th day of March, 1998, as of February 9, 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

March 10, 1998