Order No. 426-16

IN THE MATTER Of THE PROMULGATION AND ESTABLISHMENT Of FIELD RULES TO GOVERN OPERATIONS IN THE MOUNT PEARL FIELD, CHEYENNE COUNTY COLORADO

Cause No. 426 Order No. 426-16

REPORT OF THE COMMISSION

TO ALL INTERESTED PARTIES AND TO WHOM IT MAY CONCERN:

This cause came on for hearing before the Commission on August 17, 1987, 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 application of Union Pacific Resources Company, for an order approving a certain Unit Agreement and Unit Operating Agreement for the Mount Pearl Unit Area, providing for involuntary unit operations of the reservoir consisting of the Morrow B formation underlying certain lands in the Mount Pearl Field, Cheyenne County, Colorado.

FINDINGS

1. Union Pacific Resources Company, 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. The Morrow B' Formation of Pennsylvanian age was encountered in the intervals between the depths of 5386 feet to 5414 feet in well No. CPC 6 White 220-55, located in the SE/4 NW/4 Section 25, Township 13 South, Range 48 West, 6th P.M. Said Morrow B formation, as so encountered, is a common source of supply and has been defined and determined by drilling to be productive underlying the lands as shown in Exhibit 1, Attachment A which also shows wells excluded from the unit. Said lands in Cheyenne County, Colorado are described as follows:

Township 13 South, Range 47 West, 6th P.M. Section 20: S/2 SE/4, SE/4 SW/4 Section 21: SW/4 SW/4 Section 28: W/2 NW/4, NW/4 SW/4 Section 29: N/2, SW/4, N/2 SE/4 Section 30: S/2, S/2 N/2, NE/4 NE/4 Section 31: N/2 N/2 Section 32: NW/4 NW/4

Township 13 South, Range 48 West, 6th P.M. Section 25: S/2, NW/4, S/2 NE/4, NW/4 NE/4 Section 26: S/2, S/2 NE/4, SE/4 NW/4 Section 27: S/2 Section 28: S/2 S/2, NE/4 SE/4 Section 33: N/2, NE/4 SW/4, N/2 SE/4 Section 34: N/2, SE/4, N/2 SW/4 Section 35: All Section 36: N/2 N/2, SW/4 NW/4, NW/4 SW/4

5. The following described wells should be excluded from the unit area:

Township 13 South, Range 47 West, 6th P.M. Mull 1-28 LA.M., NW/4 NW/4 Section 28 CPC 3 Sayles 22-29, SE/4 NW/4 Section 29 CPC 4 Sayles 33-29, NW/4 SE/4 Section 29 CPC 5 Sayles 24-29, SE/4 SW/4 Section 29 Mull i-A Garrett, SE/4 NE/4 Section 30

Township 13 South, Range 48 West, 6th P.M. CPC 3 White 22-25, SE/4 NW/4 Section 25 CPC 4 White 33-25, NW/4 SE/4 Section 25 Mull 2 Mitchek, SE/4 SW/4 Section 26 CPC 6 Ervin 11C-33, NW/4 NW/4 Section 33 CPC 9 Mitchek, SE/4 SW/4 Section 35

6. The terms and conditions provided by the Unit Agreement and Unit Operating Agreement meet the requirements of the statute and are just and reasonable to all interests contained within said unit area. The plan for unit operations as presented by the Applicant, providing for the conduct of operations to recover oil and gas is necessary to increase the ultimate recovery and the value of the estimated additional cost incident to conducting such operations.

7. The formula for determining tract participation is based on several factors shown in Exhibit "A" of the Unit Agreement.

8. The provisions contained in said Unit Agreement and Unit Operating Agreement are just and reasonable and include the following:

a. The description of the pool to be so operated;

b. The nature of said operation;

c. The allocation to the separately owned tracts in the Mount Pearl Unit Area of all the oil and gas that is produced from said Unit Area and is saved;

d. The provisions for the credits and charges to be made in the adjustments among the owners in the Mount Pearl Unit Area for their respective investments in wells, tanks, pumps, machinery, materials and equipment contributed to the unit operations;

e. The provision providing how the costs of unit operations, including capital investments, shall be determined and charged to the separately owned tracts, and how said costs shall be paid, including the provision providing when, how, and by whom the unit production allocated to an owner who does not pay the share of the cost of unit operations charged to such owner, or the interest of such owners, may be sold and the proceeds applied to the payment of such costs;

f. The provision for the supervision and conduct of the unit operations, in respect to which each person shall have a vote with a value corresponding to the percentage of the costs of unit operations chargeable against the interest of such person; and

g. The time when the unit operations shall commence, and the manner in which, and the circumstances under which the unit operations shall terminate.

9. Re-injection of produced gas and water from the Morrow B reservoir underlying said unit area should be allowed in order to prevent waste and promote conservation and maintain pressure maintenance in the reservoir. In addition, outside sources of gas and water will be used when deemed necessary.

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10. Initial gas injection wells should be well CPC 1 Sayles 13-29, located in the NW/4 SW/4 Section 29, Township 13 South, Range 47 West and Well No. Cities 2-B Mitchek 31-34, located in the NW/4 NE/4 Section 34, Township 13 South, Range 48 West. The initial water injection wells should be well No. CPC 9 Mitchek 24-35, located in the SE/4 SW/4 Section 35, Well No. CPC 4 White 33-25, located in the NW/4 SE/4 Section 25, and well No. Cities i-A Mitchek 33-26, located in the NW/4 SE/4 Section 26, all in Township 13 South, Range 48 West, 6th P.M. In addition, any additional injection well when deemed necessary for either gas or oil may be approved by the Director, in accordance with the Rules and Regulations of the Commission.

11. Effective date of the unit plan of operations should be in accordance with the terms of the unit agreement.

12. The spacing provisions as established by Order Nos. 426-1 and 426-3 should be rescinded as far as they pertain to the lands in the Mount Pearl Unit Area, described herein above. In addition, the production restrictions as established by Order No. 426-9 (corrected) should remain in effect until such time as gas injection commences; however, production of oil or gas allowables, based on individual well tests, may be taken from more efficient wells, provided that production from well No. 5 Ervin 11-33, located in the NW/4 NW/4 Section 33, Township 13 South, Range 48 West, 6th P.M., should be no more than its individual allowable.

ORDER

NOW, THEREFORE, IT IS ORDERED, that:

1. The Unit Agreement and Unit Operating Agreement covering the Morrow formation of Pennsylvanian age underlying lands in the Mount Pearl Field are hereby approved as being in the public interest for conservation.

2. Said Morrow formation reservoir is a common source of supply and underlies the following described lands in Cheyenne County, Colorado, to-wit:

Township 13 South, Range 48 West, 6th P.M. Section 25: S/2, NW/4, S/2 NE/4, NW/4 NE/4 Section 26: S/2, S/2 NE/4, SE/4 NW/4 Section 27: S/2 Section 28: S/2 S/2, NE/4 SE/41 Section 33: N/2, NE/4 SW/4, N/2 SE/4 Section 34: N/2, SE/4, N/2 SW/4 Section 35: All Section 36: N/2 N/2, SW/4 NW/4, NW/4 SW/4 containing 4,991 acres, more or less, and such area should hereafter be known as the Mount Pearl Unit Area.

3. The following described wells shall be excluded from the unit area:

Township 13 South, Range 47 West, 6th P.M. Mull 1-28 L.A.M., NW/4 NW/4 Section 28 CPC 3 Sayles 22-29, SE/4 NW/4 Section 29 CPC 4 Sayles 33-29, NW/4 SE/4 Section 29 CPC 5 Sayles 24-29, SE/4 SW/4 Section 29 Mull 1-A Garrett, SE/4 NE/4 Section 30

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4. A re-injection project of produced gas and water from the unit reservoir, as well as injection of gas and water from outside sources when deemed necessary, as presented by the Applicant, is hereby approved and the operator is authorized to commence a'nd maintain such a project upon approval of the Director. Initial injection wells are as described in Finding 10 herein.

5. The conduct of operations for the recovery of oil and gas from the Morrow formation underlying said unit Area is hereby approved as being necessary to increase the ultimate recovery from such reservoir and prevent waste.

IT IS FURTHER ORDERED, that the spacing provisions as established by Order Nos. 426-1 and 426-3 are hereby rescinded as far as they pertain to the lands in the Mount Pearl Unit Area, described herein above. In addition, the production restrictions as established by Order No. 426-9 (corrected) shall remain in effect until such time as gas injection commences; however, production of oil or gas allowables, based on individual well tests, may be taken from more efficient wells, provided that production from well No. 5 Ervin 11-33, located in the @MISSING ORIGINAL DATA@/4 NW/4 Section 33, Township 13 South, Range 48 West, 6th P.M., shall be no more than it's individual allowable.

IT IS FURTHER ORDERED, that the effective date of the unit plan of operations shall be in accordance with the terms of the unit agreement.

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 of hearing, to alter, amend or repeal any and/or all of the above orders.

ENTERED this 3rd day of September 1987, as of August 17, 1987.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary