REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on May 16, 1994 at 8:30 a.m., in Room 318, State Centennial Building, 1313 Sherman Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of OXY USA, Inc. for an order to pool all interests in the 160-acre drilling and spacing unit consisting of the NW1/4 of Section 30, Township 2 South, Range 49 West, 6th P.M., for the development and operation of the Niobrara Formation for the production of gas and associated hydrocarbons underlying said unit, pursuant to Colorado Revised Statutes, 34-60-116, 1984.

FINDINGS

The Commission finds as follows:

1. OXY USA, Inc. 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. Order No. 342-1 issued September 18, 1978 established 160-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Niobrara Formation, with the units consisting of a governmental quarter section, with the permitted well to be located no closer than 900 feet from the boundaries of the quarter section. Subsequent Order No. 342-2 extended the provisions of Order No. 342-1 to include additional lands. Section 30, T ownship 2 South, Range 49 West, 6th P.M. was included in the Spear Field. Order No. 342-3 issued July 15, 1985 allowed an additional well to be drilled on each 160-acre drilling and spacing unit, with said well to be located no closer than 600 feet from the outer boundary of the unit and no closer than 1000 feet from any other well producing from the Niobrara Formation. Order No. 342-5 issued May 16, 1994 extended the provisions of Order No. 342-1 to in clude additional lands in the Spear Field.

6. Protests were filed by Sensor Oil & Gas, Inc., Rex H. Paullus, Jr., and Paullus & Banister, L.L.C.

7. Efforts have been made to obtain the voluntary pooling of all interests. A.F.E.'s and proposed operating agreements were furnished to Sensor Oil & Gas, Inc., Rex H. Paullus, Jr., and Paullus & Banister, L.L.C., owners of greater than seventy-three (73%) percent of the working interest underlying the NW1/4 of said Section 30, on or around March 31, 1994, and consent has not been given.

8. Testimony presented at the hearing indicated that OXY USA, Inc. owns approximately twenty-seven (27%) percent of the working interest underlying the NW1/4 of said Section 30, and that operating costs designated in the operating agreement provided by the applicant are not just and reasonable, and are inconsistent with costs prevailing in the Rocky Mountain region, as published in a national survey.

9. Based on the facts stated in the verified application, and based on testimony presented by the applicant and the protestants at the hearing, the Commission should deny an order pooling all interests in the 160-acre drilling and spacing unit consisting of the NW1/4 Section 30, Township 2 South, Range 49 West, 6th P.M.

O R D E R

NOW, THEREFORE IT IS ORDERED, that, the application of OXY USA, Inc. for an order to pool all interests in the 160-acre drilling and spacing unit consisting of the NW1/4 of Section 30, Township 2 South, Range 49 West, 6th P.M., for the development and operation of the Niobrara Formation for the production of gas and associated hydrocarbons underlying said unit, pursuant to Colorado Revised Statutes, 34-60-116, 1984 is hereby denied.

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 , 1994, as of May 16, 1994.

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 June 7, 1994 ??

(342#6)