REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on August 20, 1979 at 9:00 A.M., in Room 110, State Centennial Building, Denver, Coloradoafter giving Notice of Hearing as required by law, on the application of J-W' Operating Co. for an order establishing 160-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Niobrara formation underlying certain lands in Yuma County, Colorado.

FINDINGS

The Commission finds as follows:

1. J-W Operating Company, 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 Niobrara formation constitutes a common source of supply of gas and associated hydrocarbons underlying the following described lands in Yuma County, Colorado, to-wit Township 4 North, Range 45 West. 6th P.M. | Sections 16 thru 22: All

Township 4 North, Range 46 West, 6th P.M. Sections 11 thru 14: All Section 22: E/2 Sections 23, 24: All Sections 26, 27: All

5. The field is located on a low-relief anticlinal structure with the pro-ducing zone consisting of tight sands of low permeability and relatively high porosity. Fracture treatments are usually used upon completion of the wells. .

6. Since the hearing held in August, 1978 concerning other Niobrara gas fields, different size fracture treatments have been used upon completion of the wells. At least three (3) of these were considerably larger than those generally used, However, testimony presented at the hearing indicates that no specific data from these wells is available. Thus, the Commission has no additional information on the effectiveness of larger fracture treatments. The proponents of 640-acre drilling and spacing units, based on these techniques, have not updated the record made at the August, 1978 hearing. While new information may in the future justify a different spacing pattern than that requested, the Commission must act on the evidence currently in the record, Which indicates that 160-acre drilling and spacing units are not smaller than the maximum area that can be iciently and economically drained by one well.

(over).

7. 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 160-acre drilling and spac-ing units for the production of gas and associated hydrocarbons from the Niobrara forma-tion, common source of supply underlying the lands defined herein, said units should consist of 160-acres and consist of a quarter section of land according to the governmen-tal survey thereof, and that the permitted well for each such drilling unit should be located no closer than 900 feet from the boundaries of the quarter section upon which it is located; however, the presently producing wells or wells capable of producing, should be the permitted wells for the units upon which each is located.

8. All available geological and engineering data concerning said Niobrara formation indicate that one well will efficiently and economically drain an area of appro-ximately 160-acres, and that drilling units of the size and shape hereinabove described are not smaller than the maximum area that can be efficiently drained by one well pro-ducing from said Niobrara formation.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the following rules and regula-tions shall apply hereafter to wells drilled, completed, or recompleted in the Niobrara formation underlying the Old Baldy 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 and associated hydrocarbons from the Niobrara formation underlying the following described lands in the Old Baldy Field, Yuma County, Colorado, to-wit: Township 4 North, Range 45 West, 6th P.M. Sections 16 thru 22: All Township 4 North, Ran[Is 46 West, 6th P.M. Sections 11 thru 14: All Section 22: E/2 Sections 23, 24: All Sections 26, 27: All

Rule 2. Said drilling units shall consist of one hundred-sixty (160) acre and each such drilling unit shall consist of a quarter section of land, according to the governmental survey thereof, and the permitted well for each such drilling unit shall be located no closer than 900 feet from the boundaries of the quarter section upon which it is located however, the presently producing wells, or wells capable of producing shall be the permitted wells for the units upon which each 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 August, 1979.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary -- 2 --(#350-1)