REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on December 20, 1976, at 9 A.M., in Room 110, State Centennial Building, Denver, Colorado after giving Notice of Hearing as required by law, on the application of Termo Company of Texas for an order establishing a 640-acre drilling and spacing unit and the pooling of all interests in said unit for the development and operation thereof. In addition, the Commission, on its own motion, considered the rescinding of Order No. 240-1.

FINDINGS

The Commission finds as follows:

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

2. That the Commission has jurisdiction over the subject matter embrace in said Notice, and of the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order.

3. That on June 15, 1971, the Commission issued its Order No. 240-1 which established a 320-acre drilling and spacing unit consisting of the SE/4 Section 29 and the NE/4 Section 32, Township 12 North, Range 52 West, for the production of gas and associated hydrocarbons from the "D" Sand underlying said lands. The permitted well for the unit was the No. 1-29 Dallegge located in the center of the SW/4 SW/4 of said Section 29. In addition, all interests in said unit were pooled for development and opera-tion thereof.

4. That since the permitted well has been plugged and abandoned and in order to promote further development, Order No. 240-1 is no longer necessary and should be vacated and the area described in Finding 3 herein, should be governed by the general rules and regulations and/or by future orders of the Commission.

5. That evidence presented at the hearing indicates that the "D" Sand constitute a common source of supply of gas and associated liquid hydrocarbons under-lying the following described lands in Logan County, Colorado, to-wit: Township 12 North, Range 52 West, 6th P.M. Section 28: W/2 Section 29: E/2

6. That in order to prevent waste of oil and gas, as defined by law; to pro tect the correlative rights of all parties concerned; to prevent the drilling of unnecessary wells, and to insure proper and efficient development and promote conservation of the oil and gas resources, an order should be made establishing a 640-acre drilling and spacing unit for the production of gas and associated hydrocarbons from the "D" Sand, a common source of supply underlying the lands defined herein; that said unit should consist of the W/2 Section 28 and the E/2 Section 29, Township 12 North, Range 52 West, 6th P.M., and that the Well No. 1 Ladine, located in the SW/4 NW/4 Section 28, Township 12 North, Range 52 West, 6th P.M., should be the permitted well for said drilling and spacing unit.

7. That all geological and engineering data concerning the "D" Sand in the portion of the Peetz-Northwest Field indicates that one well should efficiently and econo-mically drain an area of approximately 640-acres, and that the drilling unit of the size and shape hereinabove described is not smaller than the maximum area that can be efficiently drained by one well producing from said "D" Sand.

8. That in order to insure proper and efficient development; to eliminate the drilling of unnecessary wells; to promote conservation of gas resources of the State, an order should be made pooling all interests in the 640-acre drilling unit described as the W/2 Section 28 and the E/2 Section 29, Township 12 North, Range 52 West, 6th P.M.

9. That the order of the Commission pooling all interests in said drilling unit is necessary, just and reasonable in order to afford each owner of interest within said drilling unit the opportunity to recover and receive his just and equitable share of the gas from the common source of supply underlying said drilling unit.

10. That production obtained from said drilling unit should be allocated to each tract therein on the basis of the proportion that the number of acres in such tract bears to the total number of acres within said drilling unit.

ORDER

NOW, THEREFORE, IT IS ORDERED that Order No. 240-1 for that portion of the Peetz-Northwest Field, Logan County, Colorado is hereby rescinded and operation in the area as described in Finding 3 herein shall be governed by the general rules and regulations and/or by future orders of the Commission.

IT IS FURTHER ORDERED, that the following rules and regulations shall apply to a well drilled, completed or recompleted in the "D" Sand underlying that portion of the Peetz-Northwest Field Described in Rule 1 herein, in addition to other applicable rules and regulations and orders of the Commission, if any, heretofore adopted and not in conflict herewith:

Rule 1. The "D" Sand is a common source of supply of gas and associate liquid hydrocarbons underlying the following described lands in Logan County, Colorado to -wit:

Township 12 North, Range 52 West, 6th P.M. Section 28: W/2 Section 29: E/2

Rule 2. The following drilling and spacing unit shall be and the same is hereby established for the production of gas and associated liquid hydrocarbons from the "D" Sand, a common source of supply, underlying that portion of the Peetz-Northwest Field as defined herein:

(a) A 640-acre drilling and spacing unit for the production of gas and associated liquid hydrocarbons from the "D" Sand, consisting of the W/2 of said Section 28 and the E/2 of said Section 29 shall constitute the drilling unit.

(b) The permitted well on said unit shall be the Well No. 1 Ladine, located in the SW/4NW/4 of said Section 28.

IT IS FURTHER ORDERED, that pursuant to the provisions of 34-60-116 of the Oil and Gas Conservation Act of the State of Colorado, all interests in the drilling unit described as the W/2 of said Section 28 and the E/2 of said Section 29, are hereby pooled for the development and operation of said drilling unit.

IT IS FURTHER ORDERED, that the production obtained from said drilling unit shall be allocated to each tract therein on the basis of the proportion that the number of acres in such tract bears to the total number of acres within said drilling unit, and each owner of interest in said tracts in said drilling unit shall be entitled to receive his share of the production of the well located on said drilling unit applicable to his interest in said drilling unit. -- 2 --(#240-2)

IT IS FURTHER ORDERED. that the rules and regulations contained herein 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 rules and regulations.

ORDERED this 20th day of December 1976.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary

-- 3 --(#240-2)