REPORT OF THE COMMISSION

This cause came on for hearing on September 18, 1978 at 9:00 A.M., in Room 110, State Centennial Building, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of Amoco Production Company, for an order approving a Unit Agreement and Unit Operating Agreement providing for involuntary unit operations of the "J" Sand reservoir underlying the Poncho Unit Area, and further to approve a fluid injection project for secondary recovery purposes and to revise the field rules governing operations in the field as established by previous orders of the Commis-sion in Cause No. 237 to make them. consistent and compatible with unit operations.

FINDINGS

The Commission finds as follows:

1. Amoco Production Company, as applicant herein, is an interested party in the subject matter of the above-referenced hearing.

2. That due notice of the time, place and purpose of the hearing has been given in all respects as required by law.

3. That 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. That the "J" Sand reservoir encountered in the Well No. 1 State, located in the SE/4 SW/4 Section 34, Township 3 South, Range 59 West, 6th P.M., Adams County, Colorado, between the approximate depths of 6030 and 6158 feet subsurface, has been defined and determined by drilling as underlying the following described lands in Adams and Arapahoe Counties, Colorado, to-wit:

Township 3 South, Range 59 West, 6th P.M. Section 33: SE/4 SE/4 Section 34: All (except the NE/4 NE/4) Section 35: W/2 SW/4 Township 4 South, Range 59 West, 6th P.M. Section 2: NW/4 NW/4 Section 9: E/2 NW/4, Section 3: N/2, W/2 SW/4 NE/4 Section 4. E/2 Section 10: NW/4 NW/4 and that said reservoir constitutes a common source of supply; and that such lands should hereafter be referred to as the Poncho "J" Sand Unit Area.

5. That the Unit Agreement and Unit Operating Agreement as presented by Applicant, are necessary to increase the ultimate recovery of oil and gas from said reservoir, and that the terms provided therein are just and reasonable to all interests contained within said "J" Sand Unit Area.

6. That the proposed fluid injection project, which will initially be water injection, and the use of other recovery techniques at some future date upon approval by the Director, for secondary recovery is necessary to increase the ultimate recovery of oil and gas, and that such operation, pursuant to said Unit Agreement and Unit Operating (over) Agreement, will result in an estimated additional recovery of oil and gas with a value in excess of the estimated additional cost incident to conducting such operation.

7. That testimony presented at the hearing showed that said Unit Agree-ment and Unit Operating Agreement have been approved in writing by those persons who, under the agreement, will be required to pay at least eighty per cent (80%) of the costs of the unit operation, and also by the owners of at least eighty per cent (80%) of the production or proceeds attributable to royalty, overriding royalty, and production payments.

8. All previous orders of the Commission in Cause No. 237 including the 80-acre spacing, as well as production restrictions on the entire area of the Poncho Field affected by such orders in Cause No. 237, are no longer necessary and should be rescinded. Such area is described as follows:

Township 3 South, Range 59 West, 6th P.M.

Section 33: All Section 34 All Township 4 South, Range 59 West, 6th P.M. Section 3: NE/4 W/2 Section 9: NE/4, W/2 Section 4: All Section 16: W/2

ORDER

NOW, THEREFORE, IT IS ORDERED:

1. The Unit Agreement and Unit Operating Agreement covering lands in the Poncho "J" Sand Unit Area, which agreements are attached to, and made a part of the original order of this Commission on file in the office of the Commission, are approved as being in the public interest for conservation.

2. The "J" Sand reservoir, common source of supply, underlies the following described lands in Adams and Arapahoe Counties, Colorado, to-wit: Township 3 South,. Range 59 West, 6th P.M. Section 33: SE/4 SE/4 Section 34: All (except the NE/4 NE/4) Section 35: W/2 SW/4 Township 4 South, Range 59 West, 6th P.M. Section 2: NW/4 NW/4 Section 9: E/2 NW/4, Section 3: N/2, W/2 SW/4 NE/4 Section 4: E/2 Section 10: NW/4 NW/4 and such area shall hereafter be known as the Poncho "J" Sand Unit Area.

3. The provisions contained in said Unit Agreement and Unit Operating Agreement as they pertain to:

a. The description of the pool to be so operated;

b. The nature of said operation;

c. The allocation to the separately owned tracts in the "J" Sand Unit Area of all the oil and gas that is produced from said "J" Sand Unit Area and is saved;

d. The provision for the credits and charges to be made in the adjustment among the owners in the Peoria "J" Sand Unit Area for their respective investments in wells, tanks, pumps, machinery, materials, and equip-ment contributed to the Unit operations; 2 --(#237-10)

e. The provision providing how the costs of Unit operations, including capital investments, shall be determined and charged to the separately owned tracts, and how said costs shall be paid, including the provision providing when, how, and by whom the Unit production allocated to an owner who does not pay the share of the cost of Unit operations charged to such owner, or the interest of such owners, may be sold and the proceeds applied to the payment of such costs.

f. The provision for the supervision and conduct of the Unit operations, in respect to which each person shall have a vote with a value corresponding to the percentage of the costs of Unit operations chargeable against the interest of such person; and

g. The time when the Unit operations shall commence, and the manner in which, and the circumstances under which the Unit operations shall terminate, are just and reasonable, and are incorporated herein as the Commission's plan of in-voluntary unit operations for such lands.

4. The fluid injection project for the "J" Sand reservoir of the Poncho "J" Sand Unit Area, as presented by Applicant, is hereby approved as being necessary to increase the ultimate recovery from said reservoir, and the operator is authorized to inject into said reservoir through injection wells in such quantities as shall be rea-sonably determined by the operator to best achieve the maximum recovery of oil without waste.

5. In the event that it becomes necessary in the future to convert additional producing wells to input wells; to plug and abandon certain wells in the Unit Area, or to drill additional producing or input wells as dictated by developments in the course of the operation of the waterflood, the Unit Operator is authorized to make such changes in the operation of the project as may be required to facilitate the efficient development thereof, including the use of other recovery techniques, subject to the approval of the Director. .

6. All previous orders in Cause No. 237 are hereby rescinded and opera-tions in the area as described in Finding 8 herein, shall be governed by the provisions of the Unit Agreement for those lands in the Poncho Unit Area and the general rules and regulations of the Commission for the remaining lands.

IT IS FURTHER ORDERED, that the rules and regulations and orders contained herein, shall become effective October 1, 1978.

IT IS FURTHER ORDERED, that the Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any part of and/or all of the above rules and regulations and orders.

ORDERED this 18th day of September, 1978.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO By Frank J. Piro, Secretary

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