REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on October 15, 1984 at 9:00 A.M., in Suite 380 Logan Tower Building, 1580 Logan Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of G. J. Morgan for an order establishing 160-acre drilling and spacing units for production of oil, gas and associated hydrocarbons from the Lance, Fox Hills, Lewis Sand members of the Lewis Shale formations and 320-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Mesaverde Group (excluding the Almond formation) and the Morapos Sand member of the Mancos Shale formation underlying certain lands in the Lay Creek Field, Moffat County, Colorado.

FINDINGS

The Commission finds as follows:

1. G. J. Morgan, 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 August 20, 1984, the Commission authorized Order No. 289-6 to be issued by which certain lands were deleted from the spaced area of the Lay Creek Field as established by Order No. 289-1 and the remaining 320-acre units for production of gas from the Almond formation of the Mesaverde Group consisting of the N/2 and S/2 of Section 18, Township 8 North, Range 92 West, the N/2 and S/2 of Section 13, Township 8 North, Range 93 West, and a unit consisting of the NW/4 Section 19, Township 8 North, Range 92 West and the NE/4 Section 24, Township 8 North, Range 93 West.

5. Evidence presented at the hearing indicates that the Lance, Fox Hills, Lewis Sand members of the Lewis Shale formations constitute a common source of supply of oil and gas and associated hydrocarbons underlying the following described designated 160-acre drilling and spacing units and that the Mesaverde Group (exclusive of the Almond formation) and the Morapos Sand member of the Mancos Shale formation constitutes a common source of supply of oil, gas and associated hydrocarbons underlying the following described designated 320-acre drilling and spacing units in Moffat County, Colorado:

160-acre units (Lance, Fox Hills, Lewis Sand) (a) SW/4 Section 18, T. 8 N., R. 92 W., 6th P.M. (b) SE/4 Section 13, T. 8 N., R. 93 W., 6th P.M. (c)W/2NW/4 Section 19, T. 8 N., R. 92 W., 6th P.M. E/2NE/4 Section 24, T. 8 N., R. 93 W., 6th P.M. 320-acre units (Mesaverde Group exclusive of the Almond formation) and the Morapos Sand (a) SW/4 Section 18, T. 8 N., R. 92 W., 6th P.M. SE/4 Section 13, T. 8 N., R. 93 W., 6th P.M. (b) NW/4 Section 19, T. 8 N., R. 92 W., 6th P.M. NE/4 Section 24, T. 8 N., R. 93 W., 6th P.M.

6. In order to prevent waste of oil and gas, as defined by law; to protect 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 160-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Lance, Fox Hills and the Lewis Sand member of the Lewis Shale formations underlying the units as described herein. 320-acre drilling and spacing units should be established for the production of oil, gas and associated hydrocarbons from the Mesaverde Group (exclusive of the Almond formation) and the Morapos Sand member of the Mancos Shale formation underlying the 320-acre units described herein. Permitted well locations should be in accordance with Rule 318. Well No. 2-19 Peroulis, located in the NW/4NW/4 (Lot 5) Section 19, Township 8 North, Range 92 West should be considered the permitted well for the unit upon which it is located.

7. That all available geological and engineering data concerning the Lance, Fox Hills, and Lewis Sand member of the Lewis Shale formations indicate that one well will efficiently and economically drain an area of approximately 160-acres and the data concerning the Mesaverde Group (exclusive of the Almond formation) and the Morapos Sand member of the Mancos Shale formation indicate that one well will efficiently and economically drain an area of approximately 320-acres, and that drilling units of the size and shape hereinabove described are not smaller than the maximum area that can be efficiently drained by one well producing from said formations.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the following rules and regulations shall apply hereafter to wells drilled, completed, or recompleted in the Lance, Fox Hills, Lewis Sand member of the Lewis Shale, the Mesaverde Group (exclusive of the Almond formation) and the Morapos Sand member of the Mancos Shale formation underlying the lands in the Lay Creek Field, herein described, in addition to other applicable rules and regulations and orders of the Commission, heretofore adopted and not in conflict herewith.

Rule 1. One hundred sixty (160) acre drilling and spacing units shall be and the same are hereby established for the production of oil, gas and associated hydrocarbons from the Lance, Fox Hills and the Lewis Sand member of the Lewis Shale formations underlying the following described units in the Lay Creek Field, Moffat County, Colorado:

(a) SW/4 Section 18, T. 8 N., R. 92 W., 6th P.M. (b) SE/4 Section 13, T. 8 N., R. 93 W., 6th P.M. (c) W/2NW/4 Section 19, T. 8 N., R. 92 W., 6th P.M. E/2NE/4 Section 24, T. 8 N., R. 93 W., 6th P.M.

Rule 2. Three hundred twenty (320) acre drilling and spacing units shall be and the same are hereby established for the production of oil, gas and associated hydrocarbons from the Mesaverde Group (exclusive of the Almond formation) and the Morapos Sand member of the Mancos Shale formation underlying the following described units in the Lay Creek Field, Moffat County, Colorado:

(a) SW/4 Section 18, T. 8 N., R. 92 W., 6th P.M. SE/4 Section 13, T. 8 N., R. 93 W., 6th P.M. (b) NW/4 Section 19, T. 8 N., R. 92 W., 6th P.M. NE/4 Section 24, T. 8 N., R. 93 W., 6th P-M.

Rule 3. Permitted well locations shall be in accordance with Rule 318; however, the Well No. 2-19 Peroulis, located in the NW/4NW/4 (Lot 5) Section 19, Township 8 North, Range 92 West, 6th P.M., shall be considered the permitted well for the unit upon which it is located.

IT IS FURTHER ORDERED, that the provisions contained in the

above order shall become effective forthwith.

2 "

(289-7)

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 14th day of November, 1984, as of October 15, 1984.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary

- 3 -(289-7)