REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 8:30 a.m. on July 11, 2000, 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 to allow an optional third well to be drilled for the production of gas and associated hydrocarbons from the Wasatch Formation in the SE1/4 of Section 34, Township 2 North, Range 97 Wes t, 6th P.M., with said well to be located anywhere within the drilling unit provided it is no closer than 600 feet from the outer boundaries of the drilling unit.

FINDINGS

The Commission finds as follows:

1. Chesapeake Operating Inc. ("Chesapeake"), 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 including Section 34, Township 2 North, Range 97 West, 6th P.M. 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 othe r producing gas well in the spaced area. On September 2, 1999, the Commission issued Order No. 256-4 which allowed an additional well to be drilled and completed to the Wasatch Formation for the production of gas and associated hydrocarbons on certain drilling and spacing units including the SE1/4 of Section 34, Township 2 North, Range 97 West, 6th P.M.

5. On May 23, 2000, Chesapeake by its attorney, filed with the Commission a verified application for an order to allow an optional third well to be drilled for the production of gas and associated hydrocarbons from the Wasatch Formation in the SE1/4 of Section 34, Township 2 North, Range 97 West, 6th P.M., with said well to be located anywhere within the drilling unit provided it is no closer than 600 feet from the outer boundaries of the drilling unit. In addition, Chesapeake requested 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 it unreasonable to drill the third well within a 600 foot setback, but no closer than 330 feet from the boundary of the drilling unit.

6. Testimony and exhibits presented at the administrative hearing showed the productive sands in the Wasatch Formation are not continuous across the application area, indicating that the requested option well is necessary to produce the gas reserves in the drilling and spacing unit.

7. Testimony and exhibits presented at the administrative hearing indicated the average drainage area for Wasatch Formation wells is 59 acres, with an average ultimate gas production of 382 MMCF.

8. Testimony and exhibits presented at the administrative hearing showed it is economic to drill an optional third well in the drilling and spacing unit and the approval of the application would prevent waste and protect correlative rights.

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 an optional third well to be drilled for the production of gas and associated hydrocarbons from the Wasatch Formation in the SE1/4 of Section 34, Township 2 North, Range 97 West, 6th P.M., with said well to be located anywhere within the drilling unit pro vided it is no closer than 600 feet from the outer boundaries of the drilling unit. In addition, 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 it unreasonable to drill the third well within a 600 foot setback, but no closer than 330 feet from the boundary of the drilling unit.

ORDER

NOW, THEREFORE IT IS ORDERED that an optional third well is hereby approved to be drilled in the SE1/4 of Section 34, Township 2 North, Range 97 West, 6th P.M., for production of gas and associated hydrocarbons from the Wasatch Formation, with said well to be located anywhere within the drilling unit provided it is no closer than 600 feet from the outer boundaries of the drilling unit.

IT IS FURTHER ORDERED, that the Director of the Commission shall have the authority to approve, without holding a hearing, exception locations no closer than 330 feet from the boundary of the drilling unit, upon an adequate showing by the operator that topography makes it unreasonable to drill the well within a 600-foot setback.

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 day of July, 2000, as of July 11, 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 July 24, 2000 ??

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