IN THE MATTER Of THE PROMULGATION AND ESTABLISHMENT Of FIELD RULES TO GOVERN OPERATIONS IN THE SHIRE GULCH FIELD (DAKOTA FORMATION), MESA COUNTY, COLORADO Cause No. 347 Order No. 347-2

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on May 21, 1979 at 9:00 A.M., in Room 110, State Centennial Building, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of Martin Oil Services, Inc., for an order establishing 640-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Dakota formation underlying certain lands in Mesa County, Colorado. The application was amended at the hearing to request the units con-sist of 320-acres instead of 640-acres.

FINDINGS

The Commission finds as follows:

1. Martin Oil Services, 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. Evidence presented at the hearing indicates that the Dakota, defined as being that interval from the top of the Dakota formation to the top of the Morrison forma-tion, constitutes a common source of supply of gas and associated hydrocarbons under-lying the following described lands in Mesa County, Colorado, to-wit:

Township 9 South, Range 96 West, 6th P.M. Section 31: All Township 10 South, Range 96 West, 6th P.M. Section 6: All Township 9 South, Range 97 West, 6th P.M. Section 35: All Section 36: All Township 10 South, Range 97 West, 6th P.M. Section 1: All Section 2: All

5. 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 320-acre drilling and spac-ing units for the production of gas from said Dakota, as defined, common source of supply underlying the lands defined herein; that said units should be 320-acre drilling units, and consist of the N/2 and S/2 in Section 1, Township 10 South, Range 97 West and for the remaining lands, the N/2 and S/2 or the E/2 and W/2 of each section according to the governmental survey thereof. The permitted well should be located in the NE/4 and SW/4 of each section and no closer than 600 feet to the boundaries of the quarter section upon which it is located.

(over)

6. All available geological and engineering data concerning said Dakota, as defined, indicate that one well will efficiently and economically drain an area of approximately 320-acres, and that drilling units of the size and shape hereinabove described are not smaller than the maximum urn area that can be efficiently drained by one well producing from said Dakota, as defined.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the following rules and regula-tions shall apply hereafter to wells drilled, completed, or recompleted in the Dakota, defined as being that interval from the top of the Dakota formation to the top of the Morri-son formation underlying the Shire Gulch 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. Three hundred-twenty (320) acre drilling and spacing units shall be and the same are hereby established for the production of gas and associated hydro-carbons from the Dakota, as defined herein, underlying the following described lands in the Shire Gulch Field, Mesa County, Colorado, to-wit:

Township 9 South, Range 96 West, 6th P.M. Section 31: All Township 10 South, Range 96 West, 6th P.M. Section 6: All Township 9 South, Range 97 West, 6th P.M. Section 35: All Section 36: All Township 10 South, Range 97 West, 6th P.M. Section 1: All Section 2: All

Rule 2. Said drilling units shall consist of 320-acres and said units shall be the N/2 and S/2 Section 1, Township 10 South, Range 97 West, and for the remaining lands, the N/2 and S/2 or the E/2 and W/2 of each section according to the governmental survey thereof (which units shall be designated at the time of filing the permit to drill); and the permitted well shall be located in the NE/4 and SW/4 of each section and no closer than 600 feet to the boundaries of the quarter section upon which it is located.

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 of the above orders, rules and regulations.

ORDERED this 21st day of May, 1979.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary -- 2 --(#347-2)