IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE WATTENBERG GAS SPACED AREA AND THE CODELL-NIOBRARA SPACED AREA, WELD COUNTY, COLORADO Cause No. 407, 232, 493 Order No. 232-79, 407-113, 493-15

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on August 17, 1992, 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 Freedom Energy, Inc. for an order to amend Cause No. 232 to allow the 320-acre drilling and spacing unit consisting of the S1/2 of Section 20, Township 3 North, Range 64 West, 6th P.M. to be segregated into two 160-acre drilling and spacing units consisting of the SW1/4 and the SE1/4 of said Section 20 for production from the "J" Sand Formation. In addition, the order should amend Cause Nos. 407 and 493 and establish 160-acre drilling and spacing units for production from the Codell, Niobrara and Sussex Formations and further, allow wells not to exceed a total of four to be drilled in the SW1/4 and the SE1/4 of Section 20 for production from the Codell, Niobrara and Sussex Forma tions, with the downhole commingling of production from the four Formations allowed.

FINDINGS

The Commission finds as follows:

1. Freedom Energy, 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. In Cause No. 232, the Commission established 320-acre drilling and spacing units for the production of gas from the "J" Sand in the Wattenberg Field with one well allowed for each unit to be located in the NE1/4 and SW1/4 and no closer than 990 feet to the boundaries of the quarter section. On August 21, 1979, the Commission issued Order No. 232-20 which allowed a second well to be drilled on each 320-acre unit, including Section 20, Township 3 Nort h, Range 64 West, 6th P.M.

5. In Order No. 407-1, the Commission established 80-acre drilling and spacing units for the production of oil and/or gas and associated hydrocarbons from the Codell Formation. Wells shall be located in the center of the 40-acre tract or quarter-quarter section with a tolerance of 200 feet in any direction. In Order Nos. 407-10 and 407-13, the Commission amended Order No. 407-1 to include production from the Niobrara Formation in certain lands and to allow the downhole commingling of production from the Codell and Niobrara Formations, including Section 20, Township 3 North, Range 64 West, 6th P.M.

6. In Order No. 493-2, the Commission established 80-acre drilling and spacing units for the production of oil and/or gas and associated hydrocarbons from the Sussex Formation. Wells shall be located in the center of the 40-acre tract or quarter-quarter section with a tolerance of 200 feet in any direction and the downhole commingling of production from the Sussex, Codell and Niobrara Formations shall be allowed, including Section 20, Township 3 North, Range 64 West, 6th P.M.

7. That evidence presented at the hearing indicates that the "J" Sand, Codell, Niobrara, Sussex and Shannon Formations constitute common sources of supply of oil, gas and associated hydrocarbons underlying the S1/2 of Section 20, Township 3 North, 64 West, 6th P.M., in Weld County, Colorado.

8. Engineering testimony presented indicated that prudent production engineering practices would allow commingled production from the various reservoirs resulting in increased recovery of reserves and no irremediable reservoir damage.

9. Based on the facts stated in the verified application and having been heard by the Director as Hearing Officer on August 13, 1992, and recommended for approval, the Commission should enter an order amending Cause No. 232 to segregate the 320-acre drilling and spacing unit consisting of the S1/2 of Section 20, Township 3 North, Range 64 West, 6th P.M. into two 160-acre drilling and spacing units consisting of the SW1/4 and the SE1/4 for production fro m the "J" Sand Formation. In addition, the order should amend Cause Nos. 407 and 493 and establish 160-acre drilling and spacing units for production from the Codell, Niobrara and Sussex Formations, and allow wells not to exceed a total of four to be drilled in the two 160-acre units in Section 20 for production from the Codell, Niobrara and Sussex Formations, with the downhole commingling of production from the four Formations allowed.

ORDER

NOW, THEREFORE, IT IS ORDERED, that, 1. Cause No. 232 is hereby amended to allow the 320-acre drilling and spacing unit consisting of the S1/2 of Section 20, Township 3 North, Range 64 West, 6th P.M. to be segregated into two 160-acre drilling and spacing units consisting of the SW1/4 and the SE1/4 of said Section 20 for production from the "J" Sand Formation.

2. Cause Nos. 407 and 493 are hereby amended to establish 160-acre drilling and spacing units consisting of the SW1/4 and the SE1/4 of Section 20, Township 3 North, Range 64 West, 6th P.M. for production from the Codell, Niobrara and Sussex Formations.

3. One well is hereby approved to be drilled for production from the "J" Sand Formation in the SW1/4 and the SE1/4 of Section 20, located no closer than 990 feet to the boundaries of the quarter section, allowing the recompletion of said well for production from the Codell, Niobrara, Sussex or Shannon Formations. Wells not to exceed a total of four are hereby approved to be drilled in the SW1/4 and the SE1/4 of Section 20 for production from the Codell , Niobrara and Sussex Formations, located in the center of the 40-acre quarter-quarter section with a tolerance of 200 feet in any direction. Any well completed in the "J" Sand Formation at a location permitted in accordance with Order No. 232-1 shall be approved as an exception location for the Codell, Niobrara and Sussex Formations in the SW1/4 and the SE1/4 of Section 20.

4. Multiple zone completions and downhole commingling of oil, gas and associated hydrocarbons from the "J" Sand, Codell, Niobrara and Sussex Formations is hereby approved.

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.

ENTERED this day of , 1992, as of August 17, 1992.

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 August 23, 1992 ??