REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on December 19, 1983 at 9:00 a.m., in Room 110, State Centennial Building, Denver, Colorado, after giving Notice of Hearing as required by law, upon the Commission's own motion in order to determine the proper drilling and spacing units for the production of gas and associated hydrocarbons from the Niobrara formation underlying certain sections that are adjacent to the spaced area of the Waverly Field, but are subject to Rule 318 of the Rules and Regulations of the Commission.

FINDINGS

The Commission finds as follows:

1. Due notice of the time, place and purpose of the hearing has been given in all respects as required by law.

2. The Oil and Gas Conservation Commission of the State of Colorado, on its own motion, deems it necessary to hold a hearing in order to determine the proper drilling and spacing units for the production of gas and associated hydrocarbons from the Niobrara formation underlying the sections that are adjacent to the spaced area of said fields but were not included and are subject to Rule 318. The area is described as follows:

Township 4 North, Range 46 West, 6th P.M. Sections 2 thru 7, 9, 10, 15, 18, 19, W/2 22, 28, 33 and 34

3. The area surrounds fields in which 160-acre drilling and spacing units have been established and the pattern should be maintained for the surrounding area. However, geological and engineering evidence presented at the hearing indicates that one (1) well will not in some cases adequately drain an area of 160-acres and that an option to drill an additional well should be allowed to economically and efficiently drain the gas and associated hydrocarbons from the Niobrara formation underlying each 160-acre unit.

4. In order to prevent waste of oil and 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

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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 gas and associated hydrocarbons from the Niobrara formation underlying the lands defined herein, that said units should be 160-acres, more or less, and consist of a quarter section according to the governmental survey, with the permitted well located in the center of either the NW quarter-quarter section or the SE quarter-quarter section, with a tolerance of 100 feet. An additional well should be allowed to be drilled in the undrilled diagonal offset quarter-quarter section. Existing wells producing gas and associated hydrocarbons from the Niobrara formation should be considered the permitted wells for the units upon which they are located.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the following rules and regulations shall apply hereafter to a well drilled, completed, or recompleted for production of gas and associated hydrocarbons from the Niobrara formation underlying the lands herein described which shall be referred to as Waverly Field (Outside Area), in addition to other applicable rules and regulations and orders of the Commission, if any, heretofore adopted and not in conflict herewith. - 2 -(328-5)

Rule 1. One hundred sixty (160) acre drilling and spacing units shall be and the same are hereby established for the production of gas and associated hydrocarbons from the Niobrara formation underlying the following described lands in the Waverly Field (Outside Area), Yuma County, Colorado, to-wit:

Township 4 North, Range 46 West, 6th P.M. Sections 2 thru 7, 9, 10, 15, 18, 19, W/2 22, 28, 33 and 34

Rule 2. Said drilling units shall consist of 160-acres, more or less, and consist of a quarter section according to the governmental survey. The permitted well shall be located in the center of either the NW quarter-quarter section, or the SE quarter-quarter section, with a tolerance of 100 feet in any direction. An additional well shall be allowed to be drilled, at the option of the operator, and shall be located in the center of the undrilled diagonal offset quarter-quarter section with a tolerance of 100 feet in any direction. Existing wells producing gas and associated hydrocarbons from the Niobrara formation shall be considered the permitted wells for the units upon which they are located.

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 1990, as of December 19, 1983.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary

Dated at Suite 380 1580 Logan Street Denver, Colorado 80203

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