IN THE MATTER OF GENERAL RULES AND REGULATIONS WITH RESPECT TO THE CONSERVATION OF OIL AND GAS IN THE STATE OF COLORADO, AND RULES OF PRACTICE AND PROCEDURE PERTAINING THERETO AND IN PARTICULAR WITH REFERENCE TO RULE 323

BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER Of THE PROMULGATION AND ESTABLISHMENT Of FIELD RULES TO GOVERN OPERATIONS IN THE CODELL-NIOBRARA SPACED AREA, WELD COUNTY, COLORADO

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CAUSE NO. 407

ORDER NO. 407-16

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on October 21, 1985 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 verified application of Shepler & Thomas, Inc. for an order to amend Order 407-1 and establish two (2) 40-acre drilling and spacing units consisting of the NW1/4SE1/4 and the SW1/4SE1/4 Section 10, Township 5 North, Range 67 West, 6th P.M. for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara formations and that downhole commingling be allowed from production from both formations. In addition, it was requested by the attorney for Fountain Oil & Gas Co. that Order No. 407-15 which denied the application of Fountain to pool all interest in the W1/2SE1/4 Section 10, Township 5 North, Range 67 West be set aside and repealed.

FINDINGS

The Commission finds as follows:

1. Shepler & Thomas, Inc. and Fountain Oil & Gas Co., as applicants herein, are interested parties 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. On December 19, 1983 the Commission authorized Order No. 407-1 to be issued which established 80-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Codell formation. The units consist of the E1/2 and W1/2 or the N1/2 and S1/2 of a quarter section with the option to drill a well on each 30-acre tract in the 80-acre unit. Subsequent orders, including Order No. 407-10 included the Niobrara formation; however, the W1/2SE1/4 Section 10, Township 5 North, Range 67 West was excluded from the provisions of Order No. 407-10 and two (2) separate 40-acre units are established for production from the Niobrara formation.

5. On August 19, 1985 the Commission authorized Order No. 107-15 to be issued which denied the application of Fountain Oil & Gas, Inc. which requested the pooling of oil interest in the W1/2SE1/4 Section 10, Township 5 North, Range 67 West.

6. The Commission determined that Order No. 407-15 is unsupportable and should be set aside and repealed and that the matter of proper spacing for the W1/2SE1/4 of said Section 10 be re-opened.

7. The W1/2SE1/4 of said Section 10 has never been designated as an 80-acre drilling and spacing unit by Shepler & Thomas for production from the Codell or Niobrara formations.

8. Testimony presented at the hearing indicates that one well will not drain more than 40-acres and a 40-acre unit is not smaller than the maximum area that can be efficiently and economically drained by one well. Therefore, two (2) 40-acre drilling and spacing units should be established.

9. Since two (2) 40-acre drilling and spacing units should be established, the application of Fountain Oil & Gas to pool an 80-acre unit should therefore be denied.

ORDER

NOW, THEREFORE, IT IS ORDERED, that Order No. 407-1 is hereby amended and two (2) 40-acre drilling and spacing units are hereby established for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara formations. Said units shall consist of the NW1/4SE1/4 and the SW1/4SE1/4 Section 10, Township 5 North, Range 67 West, 6th P.M., Weld County, Colorado, and that downhole commingling of production from the Codell and Niobrara formations is hereby allowed.

IT IS FURTHER ORDERED, that Order No. 407-15 is hereby set aside and repealed; however, in view of Finding 9, the application of Fountain Oil & Gas, Inc. to pool all interests in the W1/2SE1/4 Section 10, Township 5 North, Range 67 West is hereby denied.

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

ENTERED this 15th day of November 1985, as of October 21, 1985.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

Frank J. Piro, Secretary