REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on April 17, 1978 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 Palmer Oil and Gas Company for an order to amend Order No. 285-1 for the South Canyon Field, Order No. 309-1 for the Bridle Field and Order No. 122-1 for the Prairie Canyon Field, and establish 320-acre drilling and spacing units for the production of gas from the Dakota and Morrison forma-tions underlying certain lands in Garfield and Mesa Counties, Colorado. The application was amended at the hearing to delete from the area to be spaced the following described lands which are part of the Bridle Field, Order No. 309-1, in Garfield and Mesa Counties, to-wit:

Township 8 South, Range 104 West, 6th P.M. Section 1: All Section 12: All Section 2: All Section 13: All Section 3: N/2 Section 14: All Section 4: N/2 Section 15: All Section 10: E/2 Section 16: All Section 11: All

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 embraced in said Notice, and of the parties interested therein, and jurisidiction to promulgate the hereinafter prescribed order.

3. That on December 20, 2973 the Commission issued its Order No. 285-1 which, among other things, established 320-acre drilling and spacing units for the pro-duction of gas from the Dakota formation underlying certain lands in Garfield County known as the South Canyon Area. The order was amended by Order No. 285-4 to include production of gas from a stratigraphic zone as being from the top of the Dakota to the top of the Morrison formation. Order No. 122-1, Prairie Canyon Field, established a 640-acre unit for production of gas from the Dakota formation underlying Section 33, Township 7 South, Range 104 West, 6th P.M.

4. That testimony presented at the hearing indicates that in addition to the stratigraphic zone defined as being between the top of the Dakota formation to the top of the Morrison formation, there is also the Morrison formation as a common source of supply of gas underlying that portion of the South Canyon Area described as follows:

Township 7 South, Range 104 West, 6th P.M. Sections 13 thru 36: All Township 7 South, Range 105 West, 6th P.M. Sections 13, 24, 25 & 36: All

(over) and that said Order Nos. 285-1, 285-4 and 122-1 should be amended to include, for the area described herein, the production of gas from the Morrison formation.

5. That testimony presented at the hearing indicates that the Dakota and Morrison formations each constitutes a common source of supply of gas underlying the following described lands in Garfield and Mesa Counties, Colorado, to-wit: Township 8 South, Range 104 West, 6th P.M. Sections 5, 6, 7, 8, 17 & 18: All Township 8 South, Range 105 West, 6th P.M. Sections 1, 12 & 13: All

6. That in order to prevent the waste of 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 gas resources of the State, an order should be made establishing 320-acre drilling and spacing units for the production of gas from the Dakota and Morrison formations, each a common source of supply underlying the lands defined in Finding 5 herein. Each unit should con-sist of the E/2 and W/2 or the N/2 and S/2 of a section according to the governmental survey and the permitted well located no closer than 300 feet from the boundaries of the unit, and no closer than 1620 feet from any existing well; however, exceptions should be granted administratively due to topographic or environmental reasons, providing the owners of the units toward which the proposed location would be moved, file a waiver or consent in writing, agreeing to said exception.

7. That all geological and, engineering data concerning said Morrison formation indicate that one well will efficiently and economically drain an area of appro-ximately 320-acres, and that drilling units of the size and shape hereinabove described are not smaller than the maximum area that can be efficiently and economically drained by one well producing from said Dakota and Morrison formations.

8. That downhole commingling or multiple zone completion should be permitted in the Dakota and Morrison formations in each future or previously drilled well in the area described in Findings 4 and 5 herein.

ORDER

NOW, THEREFORE, IT IS ORDERED, that Order Nos. 285-1 and 285-4 for the South Canyon Area and 122-1 for the Prairie Canyon Field, are hereby amended to include the production of gas from the Morrison formation underlying the following described lands in that portion of the South Canyon Area, Garfield County, Colorado, to-wit:

Township 7 South, Range 104 West, 6th P.M. Sections 13 thru 36: All

Township 7 South, Range 105 West, 6th P.M. Sections 13, 24, 25 & 36: All

IT IS FURTHER ORDERED, that the following rules and regulations shall apply hereafter to wells drilled, completed or re-completed in the Dakota and Morrison formations underlying that portion of the South Canyon Area, as described herein, in addition to other applicable rules and regulations and orders of the Commission heretofore adopted and not in conflict herewith.

Rule 1. Three Hundred Twenty (320) acre drilling and spacing units shall be and the same are hereby established for the production of gas from the Dakota and Morrison formations underlying the following described lands in that portion of the South Canyon Area, Garfield and Mesa Counties, to-wit:

- 2 - (#285-5, 309-3 & 122 -2 )

Township 8 South, Range 104 West, 6th P.M. Sections 5, 6, 7, 8, 17 & 18: All Township 8 South, Range 105 West, 6th P.M. Sections 1, 12 & 13: All Rule 2. Said units shall consist of 320-acres, more or less, and each such unit shall consist of the N/2 and S/2 or the E/2 and W/2 of a section according to the governmental survey; however, those fractional sections located in said Range 105 West shall each be considered a drilling unit. The permitted well for each unit shall be located no closer than 300 feet to the boundaries of the unit and no closer than 1620 feet from any existing gas well; however, exceptions may be granted administratively due to topographic or environmental reasons, provided the owners of the units toward which the proposed location would be moved, file a waiver or consent in writing agreeing to said exceptions.

IT IS FURTHER ORDERED, that downhole commingling or multiple zone completion shall be permitted for production from the Dakota and Morrison formations in each future or previously drilled well in the spaced areas described herein.

IT IS FURTHER ORDERED, that the provisions contained in this 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, rules and regulations.

ORDERED this 17th day of April, 1978.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO By Frank J. Piro, Secretary

- 3 --(#285-5, 309-3 & 122-2)

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