IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE WATTENBERG FIELD, THE WATTENBERG GAS SPACED AREA AND THE CODELL-NIOBRARA SPACED AREA, WELD COUNTY, COLORADO Cause No. 407, 232, 499 Order No. 499-20, 232-153, 407-203

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on October 17, 1995, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of Hearing, as required by law on the verified application of Bataa Oil, Inc. for an order to amend Cause Nos. 499, 232, and 407 to allow a well to be drilled at an exception location for production from the Dakota and "J" Sand Formations, to allow the downhole commingling of production from the Dakota, "J" Sand, Codell, and Niobrara and Sussex Formations, and to approve an allocation formula.

FINDINGS

The Commission finds as follows:

1. Bataa Oil, Inc. as applicant herein, is an interested party 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. In Order No. 499-1, the Commission established 320-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Dakota Formation, identical to the 320-acre drilling and spacing units previously established for the "J" Sand Formation required by Cause No. 232, with the permitted well to be located in the NW1/4 and the SE1/4 of the section and no closer than 990 feet to the boundaries of the quarter section, for c ertain lands, including Section 36, Township 1 North, Range 67 West, 6th P.M. Subsequent orders included additional lands, allowed the permitted well to be located in any of the quarter sections and approved the downhole commingling of production from the Dakota Formation with production from the "J" Sand Formation, Codell, Niobrara and Sussex Formations.

5. In Cause No. 232, the Commission established 320-acre drilling and spacing units for the production of gas from the "J" Sand in the Wattenberg Field with one well allowed for each unit to be located in the NE1/4 and SW1/4 and no closer than 990 feet to the boundaries of the quarter section. On August 21, 1979, the Commission issued Order No. 232-20 which allowed a second well to be drilled on each 320-acre unit, including Section 36, Township 1 Nort h, Range 67 West, 6th P.M.

6. 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. In Order Nos. 407-10 and 407-13, the Commission amended Order No. 407-1 to include production from the Niobrara Formation in certain lands and to allow the downhole commingling of production from the Codell and Niobrara Formations, including Section 36, Township 1 North, Range 67 West, 6th P.M.

7. On January 21, 1992, the Commission authorized Order No. 232-52 to be issued, which pooled all interests in the 320-acre drilling and spacing unit consisting of the E1/2 of Section 36, Township 1 North, Range 67 West, 6th P.M., for production from the "J" Sand, Dakota, Codell, and Niobrara Formations.

8. In Order Nos. 499-15, 232-89, 407-125, 493-22, and 496-3, the Commission, among other things, allowed the downhole commingling of production from the Dakota and "J" Sand Formations with production from the Codell, Niobrara, Sussex, and Shannon Formations, including Section 36, Township 1 North, Range 67 West, 6th P.M.

9. That the proposed allocation method has been amended to provide for payment from the Codell, Niobrara, and Sussex Formations on a unit no smaller than the 80-acre unit consisting of the W1/2 SW1/4 of Section 36. Payment on the Dakota and "J" Sand Formations is proposed to be made on the 320-acre drilling and spacing unit consisting of the W1/2 of Section 36.

10. This matter was heard by the Hearing Officer who recommends approval based upon the testimony presented at the administrative hearing that a well drilled at an exception location for the Dakota and "J" Sand Formations at the permitted location under Cause No. 407 is more likely to encounter production from these horizons, and that approval of the downhole commingling of production from the Dakota, "J" Sand, Codell, Niobrara, and Sussex Formations wi ll prevent waste and result in minimum surface disturbance.

11. No protests to the application were received and an order of the Commission should be entered allowing the Sakata No. 13-36 Well to be drilled at an exception location in the NW1/4 SW1/4 of Section 36, Township 1 North, Range 67 West, 6th P.M., for production from the Dakota and "J" Sand Formations. In addition, the order should allow the downhole commingling of production from the Dakota and "J" Sand Formations with production from the Codell, Nio brara, and Sussex Formations and approve the amended allocation method.

ORDER

NOW, THEREFORE, IT IS ORDERED, that Order Nos. 499-5, 232-68, 407-103 and 493-13 shall be amended to allow Sakata No. 13-36 Well to be drilled and completed at an exception location in the NW1/4 SW1/4 of Section 36, Township 1 North, Range 67 West, 6th P.M., for production from the Dakota and "J" Sand Formations

IT IS FURTHER ORDERED, that the downhole commingling of production from the Dakota, "J" Sand, Codell, Niobrara, and Sussex Formations, along with an allocation method, shall be approved.

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 its 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 October 17, 1995.

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 October 27, 1995 ??

(499#20)