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 Order No. 232-110, 407-147

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on May 16, 1994 at 8:30 a.m. in Room 318, State Centennial Building, 1313 Sherman Street, Denver Colorado, after giving Notice of Hearing, as required by law, on the application of Basin Operating Company for an order to allow a well to be recompleted at an exception location for production from the "J" Sand Formation, to establish a 320-acre drilling and spacing unit and to amend Cause No. 232 to segr egate said unit into two 160-acre drilling and spacing units, to allow a well currently producing from the Codell and Niobrara Formations to also be recompleted to the Sussex and Shannon Formations and to allow production from the "J" Sand, Sussex and Shannon Formations to be commingled with production from the Codell and Niobrara Formations.

FINDINGS

The Commission finds as follows:

1. Basin Operating Company, as applicant herein, is an interested party in the subject matter of the above-entitled 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 with said units to consist of the N1/2 and S1/2 or the E1/2 and W1/2 of a governmental section for production from the "J" Sand Formation and with the authorized well to be located in the NE1/4 and the SW1/4 of each section no closer than 990 feet from the boundaries of the quarter section. By Order No. 232-20, the Commission authorized the drilling of a second well for each 320-acre drilling and spacing unit with the additional well to be located no closer than 990 feet from the boundaries of the quarter section upon which it is located, including Section 11, Township 1 North, Range 66 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. Subsequent orders of the Commission amended Order No. 407-1 to include production from the Niobrara Formation in certain lands and to allow the do wnhole commingling of production from the Codell and Niobrara Formations, including Section 11, Township 1 North, Range 66 West, 6th P.M.

6. In Order Nos. 407-66 and 232-47, the Commission, among other things, allowed the downhole commingling of production from the "J" Sand Formation with production from the Codell and Niobrara Formations, including Section 11, Township 1 North, Range 66 West, 6th P.M.

7. This matter was heard by the Hearing Officers who recommend approval based upon the testimony presented at the administrative hearing that the existing Pan American No. 1 Well should be used for production from both deeper and shallower horizons, and that a new well at an exception location should be allowed so that economic oil and gas production can be obtained from numerous zones. Additional testimony indicated that it would be uneconomical for B asin Operating Company to drill new wells for production from the "J" Sand, Sussex, and Shannon Formations.

8. Based on the facts stated in the verified application, receiving no protests, and having been heard by the Hearing Officer on May 10, 1994 and recommended for approval, the Commission should enter an order allowing the UPRR 50 Pan American #1 Well located 1980 feet FNL and 660 feet FWL in the SW1/4 NW1/4 of Section 11, Township 1 North, Range 66 West, 6th P.M. to be recompleted at an exception location for production from the "J" Sand Formation, esta blishing a 320-acre drilling and spacing unit consisting of the W1/2 of Section 11, and segregating said unit into two 160-acre drilling and spacing units consisting of the NW1/4 and SW1/4 of said Section 11. In addition, the Commission should enter an order allowing the well to also be recompleted to the Sussex and Shannon Formations for the 160-acre drilling and spacing unit consisting of the NW1/4 of said Section 11, and allowing production from the " J" Sand, Sussex and Shannon Formations to be commingled with production from the Codell and Niobrara Formations for the 160-acre drilling and spacing unit consisting of the NW1/4 of said Section 11.

ORDER

NOW, THEREFORE, IT IS ORDERED, that Cause No. 232 is hereby amended to allow the UPRR 50 Pan American #1 Well located 1980 feet FNL and 660 feet FWL in the SW1/4 NW1/4 of Section 11, Township 1 North, Range 66 West, 6th P.M. to be recompleted at an exception location for production from the "J" Sand Formation, to establish a 320-acre drilling and spacing unit consisting of the W1/2 of Section 11, and to segregate said unit into two 160-acre drilling and spacing units consisting of the NW1/4 and SW1/4 of said Section 11.

IT IS FURTHER ORDERED, that the UPRR 50 Pan American #1 Well is hereby approved to be recompleted to the Sussex and Shannon Formations, upon the filing of proper forms under Rule 303.b. of the Rules and Regulations of the Colorado Oil and Gas Conservation Commission, for the 160-acre drilling and spacing unit consisting of the NW1/4 of said Section 11.

IT IS FURTHER ORDERED, that production from the "J" Sand, Sussex and Shannon Formations is hereby allowed to be commingled with production from the Codell and Niobrara Formations for the 160-acre drilling and spacing unit consisting of the NW1/4 of said Section 11.

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 it right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.

ENTERED this day of , 1994, as of May 16, 1994.

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 June 6, 1994 ??

(232#110)