IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE CAMPANA FIELD, ADAMS COUNTY, COLORADO Cause No. 243 Order No. 243-5

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on November 19, 1984 at 9:00 A.M., in Suite 380, Logan Tower Building, 1580 Logan Street, Denver, Colorado, and was continued on January 21, 1985 at 9:00 A.M. in Room 110, State Centennial Building, 1313 Sherman Street, Denver, Colorado after giving Notice of Hearing as required by law, on the application of National Petroleum, Inc. for an order pursuant to 34-60-116, C.R.S. 1973, as amended, pooling interests in the unit consisting of NW/4 SE/4 Section 12, Township 2 South, Range 59 West, 6th P.M., for the development of oil and associated hydrocarbons from the "J" Sand underlying said unit.

FINDINGS

The Commission finds as follows:

1. National Petroleum, Inc., as applicant herein (hereinafter "Applicant"), is an interested party in the subject matter of the above-referenced hearing by virtue of his present ownership of a leasehold working interest in the subject lands.

2. Gene Lee, as Protestant herein (hereinafter "Protestant"), is an interested party in the subject matter of the above-referenced hearing by virtue of his present ownership of an unleased mineral interest in the subject lands.

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

4. The Commission has jurisdiction over the subject matter embraced in said Notice, and of the parties interested there in and jurisdiction to promulgate the hereinafter prescribed order.

5. The Commission has previously established a drilling and spacing unit consisting of the NW/4 SE/4 Section 12, Township 2 South, Range 59 West for "J" Sand production on which a well has already been drilled.

6. An order by the Commission pooling all interests in the Spacing Unit has been applied for and is necessary in order to protect correlative rights and to afford each owner of an interest in the Spacing Unit the opportunity to recover and receive his just and equitable share of the oil and gas and associated hydrocarbons from the common source of supply underlying said unit.

7. Production obtained from the Spacing Unit should be allocated to each working interest owner therein on the basis of the proportion that the number of net mineral acres owned by each owner bears to the total number of mineral acres within said unit.

8. Evidence presented at the hearing indicates that, Protestant owns an unleased 32.5 percent undivided mineral interest in the spacing unit; however, the amount should be changed if so ordered by a court of competent jurisdiction or by agreement of the parties.

9. Evidence presented at the hearing indicates that protestant was offered the opportunity to participate in the cost of the well described above as a working interest owner and that he declined to participate.

10. Evidence presented at the hearing indicates that the costs incurred in the drilling, completing and operating of the well to date, as shown in Exhibits F and G presented at the hearing (which Exhibits are on file in the Commission office and incorporated into this Order by this reference), are reasonable and should be used in determining the costs as set forth in C.R.S. 34-60-116 (7)(b), without an additional supervision charge.

ORDER

NOW, THEREFORE, IT IS ORDERED that: 1. Pursuant to the provisions of 34-60-116, C.R.S., 1973, as amended, of the Oil and Gas Conservation Act of the State of Colorado, all interests in the drilling and spacing unit consisting of the NW/4 SE/4 Section 12, Township 2 South, Range 59 West, 6th P.M., Campana Field, Adams County, Colorado, ("the Spacing Unit") are hereby pooled for the operation and development of oil and associated hydrocarbons from the "J" Sand underlying said unit.

2. The production obtained from the Spacing Unit shall be allocated to each mineral owner in the unit in proportion to the total number of mineral acres within said unit; each owner of an interest in the Spacing Unit shall be entitled to receive his share of the production of the well located in the unit applicable to his mineral ownership interest in said unit.

3. The Protestant who is a non-consenting mineral owner within the spacing unit shall be treated as the owner of a landowners royalty to the extent of 12.5% of his record title interest, which shall be considered to be 32.5% unless otherwise changed by agreement of the parties or by an order of a court of competent jurisdiction, until such time as the cost of the drilling and completion of the well already drilled on the spacing unit are recovered as specified in C.R.S. 34-60-116 (7)(b), as amended. After recovery of such costs, the Protestant non-consenting mineral owner shall then own his proportionate eight-eighths share of the well, surface facilities and production and then be liable for his proportionate share of further costs incurred in connection with the well, without additional supervision charges, as if he had originally agreed to the drilling.

4. Pursuant to C.R.S. 34-60-116 (8) C.R.S., as amended, operator of the well shall furnish the non-consenting owner with a monthly statement of all costs incurred from the date the subject well was commenced, together with the quantity of oil and gas produced, the amount of proceeds from sale of production since completion of the well and continue to furnish monthly statements of production and costs incurred, and the status of the non-consenting owners account. Applicant is and shall be the designated operator of the well.

5. For a period of six (6) months from the date hereof, Protestant and any working interest owner, shall have the right at his, or its expense to audit the costs incurred to date, and the actual amount of such costs shall be changed as necessary to conform to the final results of such audit.

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 19th February 1985, as of January 21, 1985.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary

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