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. 232-132, 407-178

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on December 19, 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 Vessels Oil and Gas Company for an order to allow a well to be drilled at an exception location for production from the "J" Sand Formation, and to allow production from the "J" Sand Formation to be commingled with prod uction from the Codell, Niobrara Sussex and Shannon Formations.

FINDINGS

The Commission finds as follows:

1. Vessels Oil and Gas 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 14, Township 4 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 14, Township 4 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 14, Township 4 North, Range 66 West, 6th P.M.

7. This matter was heard by the Hearing Officer who recommends approval based upon the testimony presented at the administrative hearing that an exception to the permitted well location is necessary to obtain economic oil and gas production from multiple zones.

8. Based on the facts stated in the verified application, receiving no protests, and having been heard by the Hearing Officer on December 16, 1994 and recommended for approval, the Commission should enter an order allowing the Dinner "E" Unit No. 2 Well located 600 feet FSL and 850 feet FWL in the SW1/4 SW1/4 of Section 14, Township 4 North, Range 66 West, 6th P.M. to be drilled at an exception location for production from the "J" Sand Formation for the 320-acre drilling and spacing unit consisting of the S1/2 of Section 14, and allowing production from the "J" Sand Formation to be commingled with production from the Codell, Niobrara, Sussex and Shannon Formations for the 80-acre drilling and spacing unit consisting of the S1/2 SW1/4 of said Section 14.

ORDER

NOW, THEREFORE, IT IS ORDERED, that Cause No. 232 is hereby amended to allow the Dinner "E" Unit No. 2 Well located 600 feet FSL and 850 feet FWL in the SW1/4 SW1/4 of Section 14, Township 4 North, Range 66 West, 6th P.M. to be drilled at an exception location for production from the "J" Sand Formation for the 320-acre drilling and spacing unit consisting of the S1/2 of Section 14, and that production from the "J" Sand Formation is hereby allowed to be c ommingled with production from the Codell, Niobrara, Sussex and Shannon Formations for the 80-acre drilling and spacing unit consisting of the S1/2 SW1/4 of said Section 14.

IT IS FURTHER ORDERED, that should a commercial well be completed at the location set forth above, the Commission shall, upon application of any interested person, take such action as will offset any advantage which the person securing the exception may have over other procedures by reason of the drilling of the well as an exception location.

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 , 1995, as of December 19, 1994.

CORRECTED this day of , 1995, as of December 19, 1994.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary

Dated at Suite 801 1120 Lincoln Street Denver, Colorado 80203 February 17, 1995 ??

(232#132)