IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE CODELL-NIOBRARA SPACED AREA, WELD COUNTY, COLORADO Cause No. 407 Order No. 407-229

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on January 6, 1997, 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 Gerrity Oil & Gas Corporation, for an order pooling all non-consenting leased working interests in the 80-acre drilling and spacing unit consisting of the N1/2 SE1/4 of Section 18, Township 5 North, Range 63 West, 6th P.M., for the development and operation of the Codell and Niobrara Formations for the production of oil and/or gas, and associated hydrocarbons underlying said unit, pursuant to 34-60-116, C.R.S. 1984.

FINDINGS

The Commission finds as follows:

1. Gerrity Oil & Gas Corporation 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. Gerrity Oil & Gas Corporation proposes to drill the SLW Green State BB No. 18-9 Well in the NE1/4SE1/4 and the SLW Green State BB No. 18-10 Well in the NW1/4SE1/4, both located in Section 18, Township 5 North, Range 63 West, 6th P.M., for production from the Codell and Niobrara Formations.

5. Efforts have been made to obtain the voluntary pooling of all interests in the N1/2 SE1/4 of Section 18, Township 5 North, Range 63 West, 6th P.M. A.F.E.'s were furnished to Rancho Partnership Ltd., Martin L. Rogers, Martin J. Harrington, Everett O. Cummings, Barbara C. Renalde and E.O.G. Oil Company on or around October 26, 1996, and consent has not been given.

6. Based on the facts stated in the verified application, having received no protests, and having been heard by the Hearing Officer, the Commission should enter an order pooling all interests in the 80-acre drilling and spacing unit herein described, in order to insure proper and efficient development of the oil and gas from the Codell and Niobrara Formations underlying said unit.

7. An order of the Commission pooling all interests in said drilling unit is necessary in order to afford each owner of interest in each said drilling unit the opportunity to recover and receive his just and equitable share of the oil and/or gas from the common source of supply underlying said drilling unit.

8. Production obtained from said drilling unit should be allocated to each tract therein on the basis of the proportion that the number of acres in each tract bears to the total number of acres within said drilling unit.

9. Gerrity Oil & Gas Corporation should be approved as the operator for the 80-acre drilling and spacing unit consisting of the N1/2 SE1/4 of Section 18, Township 5 North, Range 63 West, 6th P.M., Weld County, Colorado, for the development and operation of the Codell and Niobrara Formations.

ORDER

NOW, THEREFORE IT IS ORDERED, that, 1. Pursuant to the provisions of 34-60-116, C.R.S., 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 N1/2 SE1/4 of Section 18, Township 5 North, Range 63 West, 6th P.M., Weld County, Colorado, are hereby pooled for the development of gas and associated hydrocarbons from the Codell and Niobrara Formations underlying said unit.

2. The production obtained from said drilling unit shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within said drilling unit; each owner of an interest in said drilling unit shall be entitled to receive his share of the production of the well located on said drilling unit applicable to his interest in said drilling unit.

3. The owner of the leased and unleased tract should be afforded the opportunity to elect whether to participate in the drilling and operation of said well, and pay a proportionate share of the actual costs thereof, which proportionate share shall be determined by dividing the number of acres in each unleased tract to the total number of acres within said drilling unit.

4. Within thirty (30) days from the date of receipt of said AFE by the owner of said tract, such owner shall indicate whether he consents to the cost of the drilling of the well and agrees to participate in such costs. Such election shall be made in writing either by executing the AFE or similar document. In the event a written election to participate is not made by said owner within such time period, said owner shall be deemed to have elected not to participate and shall therefore be deemed to be non-consenting as to the well and be subject to the penalties as provided for by 34-60-116 (7).

5. Any non-consenting unleased mineral owner within the spacing unit shall be treated as the owner of the landowner's royalty to the extent of 12.5% of his or her record title interest, whatever that interest may be, until such time as the consenting owner recovers, only out of the non-consenting owner's proportionate 87.5% share of production, the costs specified in 34-60-116 (7)(b), C.R.S. as amended. After recovery of such costs, the non-consenting mineral owner shall then own his proportionate 8/8ths share of the well, surface facilities and production, and then be liable for his proportionate share of further costs incurred in connection with the well as if he had originally agreed to the drilling.

6. The operator of any well drilled on the above described unit shall furnish all non-consenting owners with a monthly statement of all costs incurred, together with the quantity of oil and gas produced, and the amount of proceeds realized from the sale of production during the preceding month.

7. Gerrity Oil & Gas Corporation is hereby approved as the operator for the 80-acre drilling and spacing unit consisting of the N1/2 SE1/4 of Section 18, Township 5 North, Range 63 West, 6th P.M., Weld County, Colorado, for the development and operation of the Codell and Niobrara Formations.

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 January, 1997, as of January 6, 1997.

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 March 25, 1997 ??

(407#229)