IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE SPINDLE FORMATION, WELD COUNTY, COLORADO Cause No. 250 Order No. 250-34

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on September 21, 1992 at 8:30 a.m., in Room 101, State Education Building, 201 East Colfax Avenue, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of Basin Operating Company for an order to establish 40-acre drilling and spacing units for production from the Shannon Formation for certain lands in Weld County, Colorado.

FINDINGS

The Commission finds as follows:

1. Basin Operating 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. On March 21, 1972, the Commission issued Order No. 250-1, which among other things, established 80-acre drilling and spacing units for the production of oil and associated hydrocarbons from the Sussex Formation, including the NW1/4 of Section 22, Township 2 North, Range 67 West, 6th P.M. Subsequent Order No. 250-12 allowed an additional well to be drilled in the center, more or less, of the undrilled 40-acre quarter-quarter section within the 80-acr e drilling and spacing unit for production from the Sussex Formation, underlying certain lands, including the NE1/4 and the S1/2 of Section 22, Township 2 North, Range 67 West, 6th P.M. Further, Order No. 250-12 allowed an additional well to be drilled in the center, more or less, of the undrilled 40-acre quarter-quarter section within each 80-acre drilling and spacing unit for production from the Shannon Formation, underlying certain lands, and allowed the downhole commingling of production from the Sussex and Shannon Formations, including all of Sections 20 and 21, Township 2 North, Range 67 West, 6th P.M.

5. That evidence presented to the Hearing Officer indicates that the Shannon Formation constitutes a common source of supply of gas underlying the following described lands in Weld County, Colorado to-wit:

Township 2 North, Range 67 West, 6th P.M. Section 22: NW1/4

6. That in order to prevent the waste of oil and gas, as defined by law, to protect 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 of the State, an order should be made establishing 40-acre drilling and spacing units for the production of Shannon Formation, underlying the lands defined herein; that said uni ts should be 40-acres, more or less, and consisting of a governmental quarter-quarter section according to the governmental survey thereof, with the permitted well to be located in the center of each quarter-quarter section, with a tolerance of 200 feet in any direction, and approving the downhole commingling of production from the Sussex and Shannon Formations.

7. Based on the facts stated in the verified application and having been heard by the Hearing Officer, the Commission should enter an order approving the spacing application.

8. Engineering testimony presented indicated that prudent production engineering practices would allow commingled production from the various reservoirs resulting in increased recovery of reserves and no irremediable reservoir damage.

O R D E R

NOW, THEREFORE, IT IS ORDERED, that the following rules and regulations shall apply hereafter to wells drilled, and completed or recompleted in the Shannon Formation underlying the Spindle Field herein described, in addition to other applicable rules and regulations and orders of the Commission, if any, heretofore adopted and not in conflict herein.

Rule 1: Forty (40) acre drilling and spacing units shall be and the same are hereby established for production of oil, gas and associated hydrocarbons from the Shannon Formation underlying the following described lands in the Spindle Field, Weld County, Colorado, to-wit:

Township 2 North, Range 67 West, 6th P.M. Section 22: NW1/4

Rule 2: Said drilling units shall consist of forty (40) acres, with the permitted well for each unit located in the center of each quarter-quarter section with a tolerance of 200 feet in any direction.

Rule 3: The downhole commingling of production from the Sussex and Shannon Formations is hereby approved for three wells to be drilled in the NW1/4 of Section 22, Township 2 North, Range 67 West, 6th P.M.

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith as all parties present at the hearing agreed to accept the verbal order of the Commission.

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 day of , 1992, as of September 21, 1992.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary

Dated at Suite 380 1580 Logan Street Denver, Colorado 80203 October 20, 1992 ??