REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on March 20, 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 Walter S. Fees, Jr., Robert J. Gutru, Leroy Bacon, Willard H. Pease, Jerry E. Shawver and Palmer Oil and Gas Company, for an order establishing l60-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Mancos "B" formation underlying certain lands in Rio Blanco County, Colorado. The application was amended at the hearing for

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 the Mancos "B" formation constitutes a common source of supply of gas underlying the following described lands in Rio Blanco County, Colorado, to-wit:

Township 4 South, Range 102 West, 6th P.M. Section 27: All Section 33: All Section 28: All

4. That 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 unneces-sary wells, and to insure proper and efficient development and promote conservation of the oil and gas resources, an order should be made establishing 160-acre drilling and spacing units for the production of gas from the Mancos "B" formation, a common source of supply underlying the lands defined herein; that said units should be 160-acres and consist of a quarter section, according to the governmental survey thereof, and the per-mitted well for each unit should be located no closer than 600 feet from the boundaries of the quarter section upon which it is located; however, the Director may, without additional notice and hearing, grant exceptions to the permitted well locations, due to topographic and environmental reasons, provided the owners of the contiguous and cornering units toward which the proposed location would be moved, file a waiver or consent in writing, agreeing to said exceptions.

5. That all geological and engineering data concerning the Mancos "B" formation indicate that one well will efficiently and economically drain an area of appro-ximately 160-acres, and that the drilling unit of the size and shape hereinabove described is not smaller than the maxi mum area that can be efficiently drained by one well produc-ing from said Mancos "B" formation.

(over)

ORDER

NOW, THEREFORE, IT IS ORDERED, that the following rules and regu-lations shall apply hereafter to a well drilled, completed, or recompleted in the Mancos "B" formation underlying that portion of the Blue Cloud 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. One Hundred Sixty (160) acre drilling and spacing units shall be and the same are hereby established for the production of gas from the Mancos "B" formation underlying the following described lands in the Blue Cloud Field, Rio Blanco County, Colorado, to-wit:

Township 4 South, Range 102 West, 6th P.M. Section 27: All Section 33: All Section 28: All

Rule 2. Said drilling units shall consist of one hundred sixty (160) acres, and each such drilling unit shall be a quarter section according to the governmental survey thereof, with the permitted well located no closer than 600 feet to the boundaries of the quarter section upon which it is located; however, the Director may, without additional notice and hearing, grant exceptions to the permitted well locations, due to topographic and environmental reasons, provided the owners of the contiguous and cornering 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 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 order, rules and regulations.

ORDERED this 20th day of March, 1978.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary -- 2 (#333-1)