REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 8:30 a.m. on August 19, 1999, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of hearing as required by law, on the application of Chesapeake Operating Inc, for an order allowing two (2) wells to be drilled and produced in each 160-acre drilling and spacing unit for certain lands in the White River Field, for production of gas and associated hydrocarbon s from the Wasatch Formation.

FINDINGS

The Commission finds as follows:

1. Chesapeake Operating Inc., 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 June 20, 1972, the Commission issued Order No. 256-1 which established 160-acre drilling and spacing units for certain lands in the White River Field for the production of gas and associated hydrocarbons from the Wasatch Formation. Wells shall be located not less than 600 feet from the boundary of the quarter section upon which it is located, and no closer than 2000 feet from any other producing gas well in the spaced area. On September 21, 1976 , the Commission issued Order No. 256-2 which deleted certain lands from the spaced area in the White River Field to be governed by the provisions of the federal unit agreement and the general rules and regulations of the Commission. On March 16, 1992, the Commission issued Order No. 256-3 which deleted certain lands from the spaced area in the White River Field so that the White River Field consists of the following:

Township 1 North, Range 97 West, 6th P.M. Section 2: N1/2

Township 2 North, Range 97 West, 6th P.M. Section 34: All Section 35: S1/2

5. On July 2, 1999, Chesapeake Operating Inc., by its attorney, filed with the Commission a verified application for an order allowing two (2) wells to be drilled on each 160-acre drilling and spacing unit described below for production of gas and associated hydrocarbons from the Wasatch Formation with the additional well to be located no closer than 600 feet from the outer boundaries of the 160-acre drilling and spacing unit. Further, the applicant re quested that the Director be allowed to grant an exception to the permitted well location without prior notice or hearing upon an adequate showing by the operator that topography makes is unreasonable to drill the second well within a 600-feet setback, but no closer than 330 feet from the boundary of the drilling and spacing unit, with requests for any other exception location to be granted in accordance with Rule 318.

Township 1 North, Range 97 West, 6th P.M. Section 2: NW1/4

Township 2 North, Range 97 West, 6th P.M. Section 34: SW1/4, SE1/4 Section 35: SW1/4

6. Exhibits and testimony presented at the administrative hearing indicated that one (1) producing Wasatch Formation well currently exists in both the SW1/4 and the SE1/4 of Section 34, one (1) producing well currently exists in the SE1/4 of Section 35, and that no producing Wasatch Formation wells currently exist in the NW1/4 of Section 2.

7. Exhibits and testimony presented at the administrative hearing described the geology of the Wasatch Sand for the lands affected by the spacing application, indicating the Wasatch Sand is a continuous producing zone across the application area.

8. Exhibits and testimony presented at the administrative hearing showed the drainage acreage calculations for the application area. The existing well in the SW1/4 of Section 34 shows a drainage area of 113 acres, the existing well in the SE1/4 of Section 34 shows a drainage area of 124 acres, and the existing well located in the SW1/4 of Section 35 shows a drainage area of 122 acres.

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

10. Based on the facts stated in the verified application, having received no protests and having been heard by the Hearing Officer who recommends approval, the Commission should enter an order allowing two (2) wells to be drilled on each 160-acre drilling and spacing unit described in Finding 5, for production of gas and associated hydrocarbons from the Wasatch Formation with the additional well to be located no closer than 600 feet from the outer boun daries of the 160-acre drilling and spacing unit. Further, the Director should be allowed to grant an exception to the permitted well location without prior notice or hearing upon an adequate showing by the operator that topography makes is unreasonable to drill the second well within a 600-feet setback, but no closer than 330 feet from the boundary of the drilling and spacing unit, and requests for any other exception location may be granted in accordan ce with Rule 318.

ORDER

NOW, THEREFORE IT IS ORDERED, that Order No. 256-3 is hereby amended to allow two (2) wells to be drilled on each 160-acre drilling and spacing unit described below for production of gas and associated hydrocarbons from the Wasatch Formation with the additional well to be located no closer than 600 feet from the outer boundaries of the 160-acre drilling and spacing unit

Township 1 North, Range 97 West, 6th P.M. Section 2: NW1/4

Township 2 North, Range 97 West, 6th P.M. Section 34: SW1/4, SE1/4 Section 35: SW1/4

IT IS FURTHER ORDERED, that the Director shall be allowed to grant an exception to the permitted well location without prior notice or hearing upon an adequate showing by the operator that topography makes it unreasonable to drill the second well within a 600-feet setback, but no closer than 330 feet from the boundary of the drilling and spacing unit, and requests for any other exception location may be granted in accordance with Rule 318.

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 2nd day of September, as of August 19, 1999.

CORRECTED this day of May, 2000.

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 May 15, 2000 ??

(256#4)