REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on December 17, 1990 at 8:30 a.m., in Room 101, State Education Building, 201 East Colfax, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified application of OXY USA, Inc., for an order authorizing involuntary unit operations with enhanced recovery involving injection of water into the Lansing "C" sandstone reservoir.

FINDINGS

The Commission finds as follows:

1. OXY USA, 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. The Lansing "C" formation of Pennsylvanian Age was encountered in an interval between the depths of 3974 feet and 3991 feet in the well Womack B-1 located in the NW/4 NE/4 of Section 11 in the below-listed lands. Said Lansing formation, as so encountered, is a common source of supply and has been defined and determined by drilling to be productive underlying the following described lands in Baca County, Colorado:

Township 35 South, Range 46 West, 6th P.M. Section 1: SW/4 SW/4 Section 2: SE/4 and SE/4 SW/4 Section 11: NE/4 NW/4, NE/4, N/2 SE/4 and SE/4 SE/4 Section 12: W/2 W/2 and NE/4 SW/4

5. The terms and conditions provided by the Unit Agreement and Unit Operating Agreement meet the requirements of the statute and are just and reasonable to all interests contained within said unit area. The plan for unit operations as presented by the Applicant, providing for the conduct of operations to recover oil and gas is necessary to increase the

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ultimate recovery and the value of the estimated additional cost incident to conducting such operations.

6. The provisions contained in said Unit Agreement and Unit Operating Agreement are just and reasonable and include the following:

a. The description of the pool to be so operated;

b. The nature of said operation;

c. The allocation to the separately owned tracts in the Tanner Lansing "C" Sand Unit Area of all the oil and gas that is produced from said Unit Area and is saved;

d. The provisions for the credits and charges to be made in the adjustments among the owners in the Tanner Lansing "C" Sand Unit Area for their respective investments in wells, tanks, pumps, machinery, materials and equipment contributed to the unit operations;

e. The provision providing how the cost of unit operations, including capital investments, shall be - 2 -(406-4)

determined and charged to the separately owned tracts, and how said costs shall be paid, including the provision providing when, how, and by whom the unit production allocated to an owner who does not pay the share of the cost of unit operations charged to such owners, may be sold and the proceeds applied to the payment of such costs;

f. The provision for the supervision and conduct of the unit operations, in respect to which each person shall have a vote with a value corresponding to the percentage of the cost of unit operations chargeable against the interest of such person; and

g. The time when the unit operations shall commence, and the manner in which, and the circumstances under which the unit operations shall terminate.

7. Re-injection of produced gas and water from the Lansing "C" reservoir underlying said unit area should be allowed in order to prevent waste and promote conservation and maintain pressure maintenance in the reservoir. In addition, outside sources of gas and water may be used when deemed necessary.

8. The initial injection wells should be those listed on Exhibit 1-A of the Application and all injection wells should be approved by the Director in accordance with the rules and regulations of the Commission prior to any injection occurring.

9. The plan for unit operations has been approved by those persons required to pay at least eighty percent of the cost of the unit operations, and by the owners of at least eighty percent of the production proceeds.

10. The spacing provisions as established by orders in Cause No. 406 as they pertain to the Lansing "C" sandstone underlying lands described in Finding 4 herein above, should be rescinded upon approval of the plan for unit operations by the Commission, and notice from the Unit Operator that unit operations have commenced.

11. This matter was heard by the Hearing Officer who recommends the application be approved as submitted, including the amended depth description contained in Finding 4 hereinabove and the amended pages 17 and 18 of the Unit Agreement.

O R D E R

NOW, THEREFORE, IT IS ORDERED, that:

1. The Unit Agreement and Unit Operating Agreement covering

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the Lansing formation of Pennsylvanian Age underlying lands in the Campo Field are hereby approved as being in the public interest for conservation.

2. Said Lansing "C" formation reservoir is a common source of supply and underlies the lands described in Finding 4 herein above, and such area shall hereafter be known as the Tanner Unit Area.

3. The conduct of operations for the recovery of oil and gas from the Lansing "C" formation underlying said Unit Area is hereby approved as being necessary to increase the ultimate recovery from such reservoir and to prevent waste.

4. A re-injection project of produced gas and water from the unit reservoir, as well as injection of gas and water from outside sources when deemed necessary, as presented by the Applicant is hereby approved and the operator is authorized to commence and maintain such a project.

5. All injection wells shall be approved by the Director in accordance with the rules and regulations of the Commission prior to any injection occurring. - 4 -(406-4)

6. The conduct of operations for the recovery of oil and gas from the Lansing "C" formation underlying said unit area is hereby approved as being necessary to increase the ultimate recovery from such reservoir and prevent waste.

7. The spacing provisions as established by orders in Cause No. 406 as they pertain to the lands in the Tanner Unit, Lansing "C" Sand, described herein above, are hereby rescinded.

IT IS IS FURTHER ORDERED, that the provisions contained in the above order shall become effective on March 1, 1991, or sooner if notice is given to the Commission by the Unit Operator. In either case, the Unit Operator shall submit complete Certificates of Clearance (Form 10) for each well in the unit upon the effective date.

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.

ENTERED this day of , 1990, as of December 17, 1990.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary

Dated at Suite 380 1580 Logan Street Denver, Colorado 80203 December 28, 1990

0864I

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