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. 407-20

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on January 17, 1986 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 HS & Associates for an order pursuant to 34-60-116, C.R.S., as amended, pooling interests in the 80-acre unit consisting of the W1/2NW1/4 of Section 36, Township 5 North, Range 66 West, 6th P.M. for the development of oil, gas and associated hydrocarbons from the Codell and Niobrara formations underlying said unit.

FINDINGS

The Commission finds as follows:

1. HS & Associates, as applicant herein, is an interested party in the subject matter of the above-referenced hearing.

2. RA Resources, Inc. ("RA"), as Protestant herein (hereinafter "Protestant"), is an interested party in the subject matter of the above-referenced hearing by virtue of its present ownership of a leasehold working interest in the subject lands.

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

4. The Commission has jurisdiction over the subject matter embraced in the notice of the aforesaid hearing, and of the parties interested therein, as well as jurisdiction to promulgate the hereinafter prescribed order.

5. 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 each governmental quarter section with the permitted wells located in the center of the 40-acre tract with a tolerance of 200 feet in any direction and the option to drill an additional well in the undrilled 40-acre tract in the 80-acre unit. Subsequent orders included the Niobrara formation. The W1/2NW1/4 Section 36, Township 5 North, Range 66 West has been designated the 80-acre drilling and spacing unit. A well is being drilled at a location in the NW1/4NW1/4 of said Section 36.

6. An order by the Commission pooling all interests in the Spacing Unit has been applied for and is necessary in order to protect correlative rights and to afford each owner of an interest in the Spacing Unit the opportunity to recover and receive his just and equitable share of the oil and gas and associated hydrocarbons from the common source of supply underlying said unit.

7. Production obtained from the Spacing Unit should be allocated to each working interest owner therein on the basis of the proportion that the number of net mineral acres owned by each owner bears to the total number of mineral acres within said unit.

8. Applicant at the time of hearing asserted that protestant's (RA) mineral ownership in the SW1/4NW1/4 of said Section 36 is twenty-five percent (25%) which is disputed by protestant.

9. Applicant should submit to the protestant within five (5) days of receipt of this Order, an operating agreement with an AFE setting forth the costs of drilling of the well and operation as well as reasonable charges, terms and provisions in the operating agreement. Protestant should then be given ten (10) days upon receipt to elect whether to participate in the well or not.

10. In the event an election to participate is not made by the protestant within the time period, said protestant should be deemed to have not elected to participate and therefore be deemed a non-consenting owner subject to the penalty provisions as set forth in 34-60-116 (7) C.R.S., as amended.

11. The designated operator of the well for the purpose of the pooling order should be HS & Associates.

ORDER

NOW, THEREFORE, IT IS ORDERED, that: 1. [sic] Pursuant to the provisions of 34-60-116, C.R.S., 1973, as amended, of the Oil and Gas Conservation Act of the State of Colorado, all interests in the drilling and spacing unit consisting of the W1/2NW1/4 Section 36, Township 5 North, Range 66 West, 6th P.M., Codell-Niobrara Spaced Area, Weld County, Colorado, ("the Spacing Unit") are hereby pooled for the operation and development of oil, gas and associated hydrocarbons from the Codell and Niobrara formations underlying said unit.

2. The production obtained from the Spacing Unit shall be allocated to each mineral owner in the unit in proportion to the total number of mineral acres within said unit; each owner of an interest in the Spacing Unit shall be entitled to receive his share of the production of the well located in the unit applicable to his mineral ownership interest in said unit.

3. Pending agreement as to final percentage ownership of protestant (RA) in the drilling unit or a final determination by a court of competent jurisdiction, the percentage interest shall be as asserted by the applicant.

4. Applicant shall submit to the protestant (RA) within five (5) days of receipt of this order, an operating agreement with an attached Authorization for Expenditure ("AFE") setting forth the costs of drilling [sic] the well including supervision, storage and future operation costs, as well as reasonable charges terms and provisions in the operating agreements.

5. The protestant (RA) shall be given ten (10) days upon receipt to elect whether to participate in the well or not. In the event an election to participate is not made within the time period, said protestant (RA) shall be decided to have not elected to participate and therefore shall be deemed a non-consenting owner subject to the penalty provisions as set forth in 34-60-116 (7) C.R.S., as amended.

6. The designated operator of the well for the purpose of the pooling order shall be the applicant, HS & Associates.

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 14th day of February, 1986, as of January 17, 1986.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

Frank J. Piro, Secretary