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, ADAMS, BOULDER, JEFFERSON, LARIMER AND WELD COUNTIES, COUNTIES, [sic] COLORADO

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CAUSE NO. 407

ORDER NO. 407-17

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on November 18, 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 Commissions [sic] own motion to amend Rule 2 of Order No. 407-1 in Cause No. 407.

FINDINGS

The Commission finds as follows:

1. Due notice of the time, place and purpose of the hearing has been given in all respects as required by law.

2. 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.

3. 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 40-acre tract in the 80-acre unit. Subsequent orders included the Niobrara formation. Rule 2 of said Order 407-1 reads in part, "Said drilling units shall consist of 80-acres, more or less, and consist of the E1/2 and W1/2 or the N1/2 and S1/2 of a quarter section according to the governmental survey, the unit to be designated by the operator upon drilling the first well in the quarter section."

4. Since several 80-acre drilling and spacing units have not been designated by operators in the Codell-Niobrara Spaced Area, the Commission finds it necessary to amend said Rule 2 in Order No. 407-1 by addition the following: "Should a unit not be designated by the operator of the first drilled in the quarter section, the Director shall designate a drilling unit for said well and so advise the operator. If within 30 days the operator objects to said designation, he shall advise the Director and the matter shall be set for hearing before the Commission".

ORDER

NOW, THEREFORE, IT IS ORDERED, that Rule 2 of Order No. 407-1 in Cause No. 407 is hereby amended and shall henceforth read as follows:

Rule 2. Said drilling units shall consist of 80-acres, more or less, and consist of the E1/2 and W1/2 or the N1/2 And S1/2 of a quarter section according to the governmental survey, the unit to be designated by the operator upon drilling the first well in the quarter section. Should a unit not be designated by the operator of the first drilled in the quarter section, the Director shall designate a drilling unit for said well and so advise the operator. If within 30 days the operator objects to said designation, he shall advise the Director and the matter shall be set for hearing before the Commission.

The permitted well shall be located in the center of either 40-acre tract within the unit, with a tolerance of 200 feet in any direction. The operator shall have the option to drill an additional well on the undrilled 40-acre tract in each 80-acre drilling and spacing unit. Exceptions may be granted by the Director, provided owners of the contiguous and cornering units file a waiver or consent in writing, agreeing to said exception. Existing wells producing from the Codell formation and locations shall be considered the permitted wells for the units upon which they are located.

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 12th day of December, 1985, as of November 18, 1985.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

Frank J. Piro, Secretary