IN THE MATTER OF THE PROMULGATION AND CAUSE NOS

IN THE MATTER OF THE PROMULGATION AND          CAUSE NOS. 499 and 232
ESTABLISHMENT OF FIELD RULES TO GOVERN
OPERATIONS IN THE WATTENBERG FIELD AND         ORDER NOS. 499-53 and
THE WATTENBERG GAS SPACED AREA, WELD                                    232-208
COUNTY, COLORADO

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 8:30 a.m. on March 31, 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 Kaiser-Francis Oil Company for an order to allow the Powers No. 41-22 Well, located 990 feet FNL and 990 feet FEL in the NE¼ NE¼ and the Powers No. 21-22 Well, located 990 feet FNL and 1,650 feet FWL in the NE¼ NW¼ of Section 22, Township 2 North, Range 65 West, 6th P.M., originally drilled for production of gas and associated hydrocarbons from the "J" Sand Formation, to be deepened as additional wells for production from the Dakota Formation for the 320-acre drilling and spacing units consisting of the E½ and W½ of said Section 22. The Applicant intends to commingle production from the Dakota Formation with production from the "J" Sand Formation.

FINDINGS

The Commission finds as follows:

1. Kaiser-Francis 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. 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 established 320-acre drilling and spacing units for certain lands previously not spaced in the lands covered by Cause No. 232, for production from the Dakota Formation to allow the recompletion and downhole commingling of production from the Dakota, "J" Sand, Codell, Niobrara, Sussex and Shannon Formations including Section 22, Township 2 North, Range 65 West, 6th P.M.

5. 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 the SW¼ and no closer than 990 feet to the boundaries of the quarter section. Additional orders allow the drilling of a second well on each 320-acre drilling unit, including Section 22, Township 2 North, Range 65 West, 6th P.M.

6. Kaiser-Francis Oil Company wishes to deepen the Powers No. 41-22 Well and the Powers No. 21-22 Well, which are both currently producing from the “J” Sand Formation, to the Dakota Formation to become the second Dakota Formation well in each unit. The deepening of these existing wells will recover additional reserves while minimizing surface impact.

7. Testimony and evidence was presented that showed a study of the reserve and drainage calculations for the Dakota Formation for the Olin 1-4 Well located in the NW¼ NE¼ of Section 4, Township 1 North, Range 65 West, 6th P.M., the Mayer 33-9P Well located in the NE¼ SE¼ of Section 33, Township 2 North, Range 65 West, 6th P.M., the Randle Red 3-2D located in the NW¼ SE¼ of Section 3, Township 1 North, Range 65 West, 6th P.M., the Powers 34-22 Well located in the SW¼ SE¼ of Section 22, Township 2 North, Range 65 West, 6th P.M., and the Powers 14-22 Well located in the SW¼ SW¼ of Section 22, Township 2 North, Range 65 West, 6th P.M. The Powers 14-22 Well located in the 320-acre Dakota Formation unit consisting of the W½ of Section 22 has a calculated drainage area of 155 acres. The Powers 34-22 Well located in the 320-acre Dakota Formation unit consisting of the E½ of Section 22 has a calculated drainage area of 111 acres.

8. That in order to prevent waste and protect the correlative rights additional wells are necessary to recover remaining Dakota and "J" Sand Formation reserves.

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

10. 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. 499-1 and 232-89, allowing the Powers No. 41-22 Well, located 990 feet FNL and 990 feet FEL in the NE¼ NE¼ and the Powers No. 21-22 Well, located 990 feet FNL and 1,650 feet FWL in the NE¼ NW¼ of Section 22, Township 2 North, Range 65 West, 6th P.M., originally drilled for production of gas from the "J" Sand Formation, to be deepened as additional wells for production from the Dakota Formation for the 320-acre drilling and spacing units consisting of the E½ and W½ of said Section 22. The Applicant intends to commingle production from the Dakota Formation with production from the "J" Sand Formation.

ORDER

NOW, THEREFORE, IT IS ORDERED, that Order Nos. 499-1 and 232-89 are hereby amended, allowing the Powers No. 41-22 Well, located 990 feet FNL and 990 feet FEL in the NE¼ NE¼ and the Powers No. 21-22 Well, located 990 feet FNL and 1,650 feet FWL in the NE¼ NW¼ of Section 22, Township 2 North, Range 65 West, 6th P.M., originally drilled for production of gas and associated hydrocarbons from the "J" Sand Formation, to be deepened as additional wells for production from the Dakota Formation for the 320-acre drilling and spacing units consisting of the E½ and W½ of said Section 22.

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 9th day of April, 1998, as of March 31, 1998.

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 9, 1998

(499-53)