IN THE MATTER Of THE PROMULGATION AND ESTABLISHMENT Of FIELD RULES TO GOVERN OPERATIONS IN THE MC ELMO DOME FIELD, MONTEZUMA COUNTY, COLORADO Cause No. 389 Order No. 389-2

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on September 15, 1986 at 9:00 A.M., in Room 110 State Centennial Building, 1313 Sherman Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of Texaco, Inc. for an order establishing two (2) 320 acre drilling and spacing units for the production of carbon dioxide from the Leadville formation underlying certain lands in Montezuma County, Colorado.

FINDINGS

The Commission finds as follows:

1. Texaco, 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 by law.

4. Based upon the facts stated in the verified application and exhibits submitted, and receiving no objections, and having been reviewed and recommenced by the Director as Hearing Officer, the Commission should enter an order establishing two (2) 320 acre drilling and spacing units for the production of carbon dioxide from the Leadville formation underlying the following described lands in Montezuma County, Colorado:

Township 36 North, Range 16 West NM P.M. Section 19: All

5. In order to prevent the waste of oil and gas, as defined by law, to protect 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 oil and gas resources of the State, an order should be made establishing production of carbon dioxide from the Leadville formation underlying the lands described herein. Each unit should consist of 320 acres, more or less, and consist of (1) the E/2 and (2) the W/2 of Section 19, Township 36 North, Range 16 West, N.MP.M. The permitted well for the unit consisting of the E/2 of said Section should be well No. 1. M.L. Smithson, located in the NW/4 SE/4 of said Section 19 and the well for the unit consisting of the W/2 should be located no closer than 600 feet to the boundaries of the unit.

6. All available geological and engineering data concerning said Leadville formation indicate that one well will efficiently and economically drain an area of approximately 320 acres, and that the drilling unit of the size and shape hereinabove described is not smaller than the maximum area that can be efficiently and economically drained by one well producing from said formation.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the following rules and regulations shall apply hereafter to wells drilled, completed, or recompleted in the Leadville formation underlying certain lands in that portion of the Mc Elmo Dome 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) three hundred twenty (320) acre drilling and spacing units shall be and the same are hereby established for the production of carbon dioxide from the Leadville formation underlying the following described lands in Montezuma County, Colorado:

Township 36 North, Range 16 West N.MP.M.

Section 19: All

Rule 2. Each unit shall consist of 320 acres, more or less, and shall consist of (1) the E/2 and (2) the W/2 of Section 19, Township 36 North, Range 16 West N.MP.M. The permitted well for the unit consisting of the E/2 of said Section 19 shall be well No. 1 M.L. Smithson, located in the NW/4 SE/4 of said section, and the well for the unit consisting of the W/2 shall be located no closer than 600 feet to the boundaries of the unit.

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

IT IS FURTHER ORDERED, that the Commission expressly reserve its right, after notice of hearing, to alter, amend or repeal any part or all of the above order.

ENTERED this of September 1986, as of September 15, 1986.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary

(389-2)