REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on July 18, 1983 at 9:00 A.M., in Room 110, State Centennial Building, Denver, Colorado, after giving Notice of Hearing as required by law, on the Commission's own motion to consider the production practices in the Sorrento Field that may constitute waste as that term is defined in 34-60-103(11) C.R.S- 1973, as amended.

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 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. On July 16, 1979 the Commission issued Order No. 349-1 which established 80-acre drilling and spacing units for the production of oil and associated hydrocarbons from the Morrow formation underlying the following described lands in the Sorrento Field, Cheyenne County, Colorado, to-wit:

Township 13 South, Range 48 West, 6th P.M. Section 31: All

Township 13 South, Range 49 West, 6th P.M. Sections 19 thru 21; 28 thru 30; 31 thru 36

Township 13 South, Range 50 West, 6th P.M. Sections 24, 25 and 36

Township 14 South, Range 48 West, 6th P.M. Section 6: All Section 7: All Section 18: All

Township 14 South, Range 49 West, 6th P.M. Sections 1 thru 15 Township 14 South, Range 50 West, 6th P.M. Sections 1 and 12

4. The producing mechanism of the reservoir is solution gas and gas cap drive with limited water encroachment. Two geological interpretations concerning the reservoir were presented at the hearing. One interpretation indicated that point bar deposition barriers may exist causing separate reservoirs. The second indicated that there may be a thinning of the sands, resulting in a continuous reservoir. However, pressure data submitted showed such pressures to be relatively uniform throughout the pay zone, indicating that regardless of the existence of barriers, there is communication throughout the reservoir and improper production practices in any part of the reservoir can cause waste throughout the entire reservoir.

5. Uncontroverted evidence at the hearing showed that present production practices in the reservoir constitute waste in that reservoir pressures have been, and are being unreasonably reduced and the reservoir energy dissipated. In addition, indiscriminate production could result in Water encroachment bypassing oil in the reservoir which will result in a substantial volume of oil being unrecoverable. Estimates by the operators indicate that between 3.6 and 5 million barrels of oil will be unrecoverable by secondary methods if the current wasteful practices are continued. 6. Although operators in the field have been aware of the wasteful production practices in the field, they have failed to agree on a program to prevent waste of oil and gas in violation of the Colorado statute. The Commission must take appropriate measures to prevent further waste. 7. Based on the evidence at the hearing, the field should be shut-in until a plan of production practices is presented by the operators in the field to eliminate the current waste. However, upon request of the operators to be given time to investigate their contractual obligations and report to the Commission, a production limitation should be placed on wells in the field. 8. Commencing August 1, 1983, production of oil from the Morrow formation from any well located in the area described in Finding 3 herein should be limited to 10 bbls/day, on a daily basis, with no over or underproduction makeup allowed. Upon request of the operator, the limitation of oil production may be modified upon approval of the Director for purposes of any tests necessary to obtain data to develop a plan of operation to prevent further waste from occurring. 9. A hearing should be held on the scheduled hearing date of August 15, 1983 for further evidence and recommendations which the operators in the field may desire to present to the Commission concerning a plan to eliminate waste.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the following rules shall apply to wells located in the Sorrento Field, described in Finding 3 herein, and producing oil from the Morrow formation. Rule 1. Commencing August 1, 1983, production of oil from each well shall be limited to ten (10) bbls/day, on a daily basis with no over or underproduction makeup allowed. Rule 2. Upon request of the operator, the limitation of oil production may be modified upon approval of the Director for testing purposes. IT IS FURTHER ORDERED, that a hearing shall be held on August 15, 1983 for further evidence and recommendations which the operators in the field may desire to present to the Commission concerning this matter. The Commission, however, reserves the right, based on the evidence presented at the July 18, 1983 hearing, to shut-in the field in the event an acceptable plan to prevent further waste from occurring is not voluntarily submitted by the operators. 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.

-- 2 (349-3)

ENTERED THIS 28TH day of July, 1983, as of July 18 1983.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary

-- 3 " (349-3)

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