REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on October 18, 1982 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 Chieftain Oil & Gas Company, for an order to establish 40-acre drilling and spacing units for the production of oil from the Niobrara formation, and 80-acre drilling and spacing units for the production of oil from the Codell formation underlying certain lands in Larimer and Weld Counties, and in addition an application for an order granting an exception to Rule 318 for Well No. 1A Colson, drilled at a location in the NE/4NE/4 Section 5, Township 4 North, Range 68 West, 6th P.M., and for Well No. 1A Kuehl, to be drilled at a location in the SE/4NE/4 of said Section 5.

FINDINGS

The Commission finds as follows:

1. Chieftain Oil & Gas 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. Protests to the granting of the application were received from Skaer Enterprises and L & L, Inc., interested parties in this matter. However, it was requested, with the consent of all parties, that 40-acre, more or less, drilling and spacing units be established for the production of oil and gas from the Niobrara and Codell formations underlying the lands consisting of the E/2NE/4 Section 5, Township 4 North, Range 68 West, 6th P.M. (including the east 125 feet of the W/2NE/4 of said section), and that the Well No. 1A Colson, located in the NE/4NE/4 of said section, and Well No. 1A Kuehl, to be drilled in the SE/4NE/4 of said section be the permitted wells for the 40-acre units upon which they are located, and further that the interests in said units, including 1& L, Inc., as an unleased non-consenting owner, be pooled in accordance with the provisions of 34-60-116 C.R.S. 1973, as amended.

5. A stipulation, entered into by all interested parties, was submitted to the Commission for approval. Said stipulation contains the following conditions:

a. L & L Inc., is an unleased non-consenting owner according to 34-60-116, C.R.S. 1973, as amended.

b. L & L, Inc. will be paid a royalty prior to payout of sixteen percent (16%) instead of the twelve and one-half percent (12.5%) royalty provided by statute.

c. The operator of the wells will provide reasonable accounting of expen-ditures and payments from production to the unleased non-consenting owner.

d. This stipulation and agreement will leave unresolved the cases currently pending in the cases in Weld County District Court.

e. The parties would agree and stipu-late that spacing the E/2NE/4 Section 5, Township 4 North, Range 68 West, 6th P.M. (to include the east 12.5 feet of the W/2NE/4 of said section), as the two 40-acre tracts, or approximately 40-acre tracts, is appropriate from a geological and reservoir characteristic standpoint, but that this agreement between parties applies only to the 80-acres in question and that this agreement shall not be construed as proof that such spacing is appropriate for the remaining acreage deleted from the application, particularly in view of the fact that the acreage is on the edge of the field as presently defined.

f. The parties would agree that the Loveland Field outside the 80-acre tract has heretofore been developed in an orderly and equitable manner under existing statewide spacing rules and the introduction of new spacing areas outside the 80-acre tract is not warra-nted.

g. The operator of the Kuehl well shall take all efforts to control deviation of said well and shall in all events be required to comply with Rule 318 of the Commission. The operator will furnish to Skaer Enterprises all evidence necessary to verify compliance with Rule 318.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the following rules and regulations shall apply hereafter to wells drilled, completed or recompleted in the Niobrara and Codell formations underlying certain lands in the Loveland 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. Two (2) Forty (40) acre drilling and spacing units shall be and the same are hereby established for the production of oil and gas from the Niobrara and Codell formations underlying the following described lands in Weld County, Colorado, to-wit:

Township 4 North, Range 68 West, 6th P.M. Section 5: E/2NE/4 (including the east 12.5 feet of the W/2NE/4) Rule 2. Said drilling units shall consist of 40-acres, more or less, and shall consist of the NE/4NE/4 and the SE/4NE/4 (including the east 12.5 feet of the W/2NE/4) of said Section 5. The permitted well for the unit consisting of the NE/4NE/4 shall be Well No. i-A Colson, and for the unit consisting of the SE/4NE/4 shall be Well No. i-A Kuehl

IT IS FURTHER ORDERED, that pursuant to the provisions of 34-60-116, C.R.S. 1973, as amended, of the Oil and Gas Conservation Act of the State of Colorado, and the stipulation agreed to, all interests in each said drilling unit, consisting of the NE/4NE/4 and the east 12.5 -- 2 --(384-2) feet of the NW/4NE/4, and the SE/4NE/4 and the east 12.5 feet of the SW/4NE/4 Section 5, Township 4 North, Range 68 West, 6th P.M., Weld County, Colorado, are hereby pooled for the development of oil and gas from the Niobrara and Codell formations.

IT IS FURTHER ORDERED, that the production obtained from said drilling units shall be allocated to each tract therein on the basis of the proportion that the number of acres in each tract bears to the total number of acres within said drilling unit, and each owner of interest in said tracts in said drilling units shall be entitled to receive his share of production of the well located on said drilling unit, applicable to his interest in said drilling unit.

IT IS FURTHER ORDERED, that the stipulation entered into by Chieftain Oil & Gas Company, Skaer Enterprises and L & L, Inc., contained in Finding 5 herein is hereby approved.

IT IS FURTHER ORDERED, that the unleased non-consenting landowner bear its proportional share of reasonable cost of the wells in each unit as provided in the statute, and that the Commission shall retain jurisdiction over this matter to determine allowable costs.

IT IS FURTHER ORDERED, that the provisions contained in the above orders shall become effective forthwith.

Entered this 17th day of November 1982, as of October 18, 1982.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary

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