REPORT OF THE COMMISSION

This Cause came on for hearing before the Commission on June 4, 1999, at 8:30 a.m. in Rifle Town Hall Council Chambers, 202 Railroad Ave., Rifle, Colorado, after giving Notice of Hearing, as required by law on the application of Plains Petroleum Operating Company, for an order to allow the drilling of one additional well in each 160-acre drilling and spacing unit for certain lands located in the Shout Field, for production of gas and associated hydrocarb ons from the Niobrara Formation.

FINDINGS

The Commission finds as follows:

1. Plains Petroleum Operating Company ("Plains") 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 January 17, 1977, the Commission issued Order No. 316-1, which established 640-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Niobrara Formation with the permitted well to be located no closer than 990 feet from the unit boundary underlying certain lands underlying certain lands in the Shout Field. The spaced area was extended by Order No. 316-2 issued December 15, 1977. By Order No. 316-3, dated Au gust 22, 1978 and upheld by Order No. 316-4 dated August 17, 1981, the size of the drilling and spacing units within the spaced area was reduced to 160-acres with the permitted well to be located no closer than 900 feet from the unit boundaries for the below-listed lands:

Township 2 North, Range 46 West, 6th P.M. Sections 6, 7 and 18

Township 2 North, Range 47 West, 6th P.M. Sections 1 thru 5; 8 thru 14

Township 3 North, Range 47 West, 6th P.M. Sections 25 thru 28; 33 thru

5. On April 21, 1999, Plains, by its attorney, filed with the Commission a verified application for an order to allow additional wells to be drilled and completed for the production of gas and associated hydrocarbons from the Niobrara Formation, on 160-acre drilling and spacing units at the option of the operator for the below-listed lands. Subsequent wells shall be located no closer than 560 feet from the outer boundaries of said 160-acre drilling and s pacing unit. The Director shall be allowed to grant an exception location without prior notice or hearing upon an adequate showing by the applicant that topography makes it unreasonable to drill the second well within a 560 feet setback, but no closer than 380 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.

Township 3 North, Range 47 West, 6th P.M. Sections 33 and 34

6. At the time of the administrative hearing, at the request of several operators, Plains withdrew from the application the request to allow the Director to grant exception locations without prior notice for topographic reasons for wells to be located no closer than 380 feet from the boundaries of drilling and spacing units.

7. Testimony and exhibits presented at the administrative hearing indicated the boundaries of the Shout Field and the existing Niobrara Formation wells in the area surrounding the application. Additional testimony and exhibits utilized a structure map on the top of the Niobrara Formation to show that the Beecher Island zone is a chalk formation located in the top of the Niobrara Formation. Further, the Beecher Island zone of the Niobrara Formation is c ontinuous across the application area and is a common source of supply.

8. Testimony and exhibits presented at the administrative hearing indicated that the average acres drained in the area of the application are thirty-eight (38) acres per existing well. In order to prevent waste and protect correlative rights additional wells should be allowed within the established drilling units to ensure efficient and economic incremental gas recovery from the Niobrara Formation in the application lands. Further testimony indicated t hat production from an additional well in the spacing unit would result in an economic well.

9. On May 20, 1999, a Local Public Forum on the application was held in Wray to consider potential issues related to the environment, public health, safety and welfare. No additional conditions were recommended to be placed on the application and a Public Issues Hearing on the application was not recommended.

10. At the time of the administrative hearing, Plains agreed to be bound by oral order of the Commission.

11. 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 one additional well to be drilled on each 160-acre drilling and spacing unit for the lands described in Finding 5, at the option of the operator for the production of gas and associated hydrocarbons from the Niobrara Formation.

ORDER

NOW, THEREFORE, IT IS ORDERED, that Order No. 316-3 is hereby amended to allow an additional well to be drilled and completed for the production of gas and associated hydrocarbons from the Niobrara Formation, on the 160-acre drilling and spacing units described below, at the option of the operator. Subsequent wells shall be located no closer than 560 feet from the outer boundaries of said 160-acre drilling and spacing unit.

Township 3 North, Range 47 West, 6th P.M. Sections 33 and 34

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 June, 1999 as of June 4, 1999.

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 June 11, 1999 2 (316-5)