REPORT OF THE COMMISSION

This cause came for hearing before the Commission on April 18, 1977 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 Beaver Mesa Exploration Company, for an order establishing 640-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Permian-Pennsylvanian underlying certain lands in San Miguel County, Colorado.

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 jurisdiction to promulgate the hereinafter prescribed order.

3. That evidence presented at the hearing indicates that the Permian-Pennsylvanian constitutes a common source of supply of gas and associated hydrocarbons underlying the following described lands in San Miguel County, Colorado, to-wit:

Township 44 North, Range 14 West, N.M P.M. Sections 1 thru 36

Township 44 North, Range 15 West, N.M P.M. Section 1: All Section 23: All Section 2: All Section 24: All Section 11: All Section 25: All Section 12: All Section 26: All Section 13: All Section 35: All Section 14: All Section 36: All

4. That in order to prevent the waste of gas, as defined by law; to protect 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 the gas resources of the State, an order should be made establishing 640-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Permian-Pennsylvanian, common source of supply underlying the lands defined herein; that said units should be 640-acre drilling units, and consist of a section of land according to the governmental survey thereof, and that the permitted well for each such drilling unit should be located no closer than 990 feet from the boundaries of the unit; however, Well No. 11-16 State, located in the NW/4 Section 16, Township 44 North, Range 14 West, N.M P.M. should be the permitted well for the unit upon which it is located and Well No. 1 Govt., located 820 feet from the south line and 2295 feet from the east line Section 14, Township 44 North, Range 14 West, N.M P.M., which will be re-entered, should be considered an exception and be the permitted well for the unit upon which it is located.

5. That since Sections 1 through 6, Township 44 North, Range 14 West, N.M P.M. and Sections 1 and 2, Township 44 North, Range 15 West, N.M P.M. are irregularly surveyed governmental sections consisting of acreage ranging from approxi-mately 248 to 268 acres, four (4) drilling and spacing units should be designated as follows:

(over)

Unit 1 Township 44 North, Range 14 West, N.M P.M. Section 1: All Section 2: All (600.44 acres) Unit 2 Township 44 North, Range 14 West, N. MP.M. Section 3: All Section 4: All (540.48 acres ) Unit 3 Township 44 North, Range 14 West, N.M P.M. Section 5: All Section 6: All (484.84 acres ) Unit 4 Township 44 North, Range 15 West, N.M P.M. Section 1: All Section 2: All (488.20 acres) and the permitted well for each such designated unit should be located within 200 feet of the east-west center line of each unit and no closer than 990 feet from the east and west boundaries of each designated unit.

6. That all available geological and engineering data concerning said permian-Pennsylvanian indicate that one well will efficiently and economically drain an area o[ approximately 640-acres, and that drilling units of the size and shape here-inabove described are not smaller than the maximum area that can be efficiently drained by one well producing from said permian-Pennsylvanian.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the following rules and regula-tions shall apply hereafter to wells drilled, completed, or recompleted in the Permian-Pennsylvanian underlying the Hamilton Creek Field herein described, in addition to other applicable rules and regulations and orders of the Commission, if any, heretofore adopted and not in conflict herewith:

Rule 1. Six Hundred Forty (640) acre drilling and spacing units shall be and the same are hereby established for the production of gas and associated hydrocarbons From the Permian-Pennsylvanian underlying the following described lands in the Ham Creek Field, San Miguel County, Colorado, to-wit:

Township 44 North, Range 14 West, N.M P.M. Sections 1 thru 36 Township 44 North, Range 15 West, N.M P.M. Section 1: All Section 23: All Section 2: All Section 24: All Section 11: All Section 25: All Section 12: All Section 26 All Section 13: All Section 35: All Section 14: All Section 36 All

Rule 2. Said drilling units shall consist of six hundred forty (640) acres and each such drilling unit shall consist of a section of land, according to the govern-mental survey thereof, and the permitted well for each such drilling unit shall be located no closer than 990 feet from the boundaries of the unit; however, Well No. 11-16 State, located in the NW/4 Section 16, Township 44 North, Range 14 West, N.M P.M., shall the permitted well [or the unit upon which it is located and Well No. 1 Govt., located feet from the south line and 2295 feet from the east line, Section 14, Township 44 North Range 14 West, N.M P.M., which will be re-entered, shall be considered an exception and be the permitted well for the unit upon which it is located. -- 2 (#323-1)

Rule 3. Four (4) drilling and spacing units are hereby designated and shall consist of the Following described lands:

Unit 1 Township 44 North, Range 14 West, N.M P.M. Section 1: All Section 2: All (600.44 acres) Unit 2 Township 44 North, Range 14 West, N.M P.M. Section 3 All Section 4: All (540.48 acres ) Unit 3 Township 44 North, Range 14 West, N.M P.M. Section 5: All Section 6: All (484.84 acres ) Unit 4 Township 44 North, Range 15 West, N.M P.M. Section 1: All Section 2: All (488.20 acres)

The permitted well For each designated unit shall be located within 200 Feet of the east-west center line of each unit and no closer than 990 Feet From the east and west boundaries of the designated unit.

IT IS FURTHER ORDERED, that the rules and regulations contained herein 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 or the above order, rules and regulations.

ORDERED this 18th day of April, 1977.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary -- 3 --(#323-1)