REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 8:30 a.m. on December 2, 1999, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado on the application of Energy Alliance Company, Inc. ("EAC"), for an order to reconfigure certain drilling and spacing units, and to correct the number of acres and designations for existing drilling units.

FINDINGS

The Commission finds as follows:

1. Energy Alliance Company, Inc. ("E.A.C."), as applicant herein, is an interested party in the subject matter of the above-referenced matter.

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. On March 18, 1985, the Commission issued Order No. 428-1, as corrected, which established 320-acre drilling and spacing units for certain lands in the Flank Northwest Field for the production of gas and associated hydrocarbons from the Cherokee Formation. On July 5, 1996, the Commission issued Order No. 428-2 which redesignated certain drilling and spacing units in the Flank Northwest Field, spaced other Pennsylvanian formations under the provisions of Order No. 428-1, and removed certain lands from previously established units.

5. On October 13, 1999, E.A.C, filed with the Commission a verified application in accordance with Order No. 428-2 to reconfigure the units described below to include certain lands along the southern boundary of Section 12, Township 33 South, Range 44 West, 6th P.M., removed from the original 320-acre drilling and spacing units established in Order No. 428-1.

UNIT 1-13: Township 33 South, Range 44 West, 6th P.M. Section 12: Lots 47 (7.44) and 50 (7.44) Section 13: Lots 5 (40.00), 6 (40.00), 12 (32.66), 15 (32.66), 44 (2.24) and 46 (7.22) Section 13: That portion of Tract 55 described as Lots 14 (2.29), 16 (7.34), 29 (40.00), 30 (12.45), 43 (10.18) and 45 (32.78) of said Section 13 Section 13: That portion of Tract 56 described as Lots 13 (5.05), 31 (27.55) and 41 (22.60) of said Section 13 Section 13: That portion of Tract 64 described as Lot 42 (4.98) of said Section 13 containing a total of 334.88 acres, more or less In accordance with Order No. 428-1 (as corrected) Order No. 428-1 (as corrected) reflects this as "Unit 7" containing 320.44 acres. The prior unit description does not include lands in Section 12 and does not reflect Lot 42 as being a portion of Tract 63

UNIT 2-13: Township 33 South, Range 44 West, 6th P.M. Section 12: Lots 42 (7.44) and 45 (7.44) Section 13: N/2NW/4, Lots 7 (32.66), 10 (32.66), and 36 (4.98) Section 13: That portion of Tract 56 described as Lots 9 (2.29), 11 (7.34), 32 (40.00), 33 (12.45), 37 (10.18) and 39 (32.78) Section 13: That portion of Tract 57 lying in Section 13 more particularly described as Lots 8 (5.05), 34 (27.55) and 35 (22.60) Section 13: That portion of Tract 63 described as Lots 38 (2.24) and 40 (7.22) containing a total of 334.88 acres, more or less In accordance with Order No. 428-1 (as corrected) Order No. 428-1 (as corrected) reflects this as "Unit 6" containing 320.00 acres. The prior unit description does not include lands in Section 12 and does not reflect Lot 38 and 40 as being a portion of Tract 63

6. In addition, E.A.C. requested the amendment of Order Nos. 428-1 and 428-2 to reflect new designations for the previously established 320-acre drilling and spacing units and to correct land descriptions and total acreage contained within certain units, as described below:

UNIT 1-11: Township 33 South, Range 44 West, 6th P.M. Section 11: W/2, more fully described as the NW/4, N/2SW/4, SE/4SW/4, Lots 8 (34.82) and 9 (5.15) containing a total of 319.97 acres, more or less In accordance with Order No. 428-1 (as corrected) No changes made to acreage included in this unit

UNIT 2-11: Township 33 South, Range 44 West, 6th P.M. Section 11: E/2, more fully described as the N/2NE/4, Lots 1 (37.53), 3 (32.41), 7 (27.23), 10 (29.73) and 13 (7.44) and that portion of Tract 47 described as Lots 2 (2.44), 4 (7.56), 5 (39.97), 6 (12.74), 11 (10.24) and 12 (32.53) containing a total of 319.82 acres, more or less In accordance with Order No. 428-1 (as corrected) No changes made to acreage included in this unit

UNIT 1-12: Township 33 South, Range 44 West, 6th P.M. Section 12: Tract 52, also described as Lots 26 (2.42), 28 (7.56), 30 (5.14), 31 (27.24), 32 (40.00), 33 (12.75), 53 (10.01), 55 (32.56) and 57 (22.24) of said Section 12 Section 12: Tract 50, also described as Lots 20 (2.42), 22 (7.56), 24 (5.14), 34 (27.25), 35 (40.00), 36 (12.75), 48 (10.01), 49 (32.56) and 51 (22.55) of said Section 12 containing a total of 320.16 acres, more or less In accordance with Order No. 428-1 (as corrected); amended by Order No. 428-2 Order No. 428-2 reflects unit as containing 320.05 acres (100% federal)

UNIT 2-12: Township 33 South, Range 44 West, 6th P.M. Section 12: That portion of Tract 51 lying within Section 12, also described as Lots 1 (27.05), 2 (40.00), 3 (13.00), 25 (10.31), 27 (32.44), 29 (22.00) of said Section 12 Section 12: Lots 4 (27.00), 5 (40.00), 6 (12.78), 19 (10.30), 21 (32.44) and 23 (22.13) containing a total of 289.45 acres, more or less In accordance with Order No. 428-1 (as corrected); amended by Order No. 428-2 No changes made to acreage included in this unit

UNIT 3-12: Township 33 South, Range 44 West, 6th P.M. Section 12: That portion of Tract 48 lying within Section 12, more particularly described as Lots 7 (27.22), 8 (40.00), 9 (12.80), 13, (10.24), 15 (32.42) and 17 (22.14) Section 12: Lots 10 (27.20) and 11 (22.20) containing a total of 194.22 acres, more or less (federal and fee lands) In accordance with Order No. 428-1 (as corrected); amended by Order No. 428-2 Order No. 428-2 reflects unit as containing 194.28 acres (100% fee)

UNIT 4-12: Township 33 South, Range 44 West, 6th P.M. Section 12: Tract 49, also described as Lots 14 (2.42), 16 (7.58), 18 (5.14), 37 (27.25), 38 (40.00), 39 (12.75), 43 (10.01), 44 (32.56) and 46 (22.55) Section 12: That portion of Tract 47 lying within Section 12, more particularly described as Lots 12 (5.14), 40 (27.25) and 41 (22.55) containing a total of 215.20 acres, more or less (all fee lands) In accordance with Order No. 428-1 (as corrected); amended by Order No. 428-2 Order No. 428-2 reflects unit as containing 218.20 acres (100% fee)

UNIT 1-13: Township 33 South, Range 44 West, 6th P.M. Section 12: Lots 47 (7.44) and 50 (7.44) Section 13: Lots 5 (40.00), 6 (40.00), 12 (32.66), 15 (32.66), 44 (2.24) and 46 (7.22) Section 13: That portion of Tract 55 described as Lots 14 (2.29), 16 (7.34), 29 (40.00), 30 (12.45), 43 (10.18) and 45 (32.78) of said Section 13 Section 13: That portion of Tract 56 described as Lots 13 (5.05), 31 (27.55) and 41 (22.60) of said Section 13 Section 13: That portion of Tract 64 described as Lot 42 (4.98) of said Section 13 containing a total of 334.88 acres, more or less In accordance with Order No. 428-1 (as corrected) Order No. 428-1 (as corrected) reflects this as "Unit 7" containing 320.44 acres. The prior unit description does not include lands in Section 12 and does not reflect Lot 42 as being a portion of Tract 63

UNIT 2-13: Township 33 South, Range 44 West, 6th P.M. Section 12: Lots 42 (7.44) and 45 (7.44) Section 13: N/2NW/4, Lots 7 (32.66), 10 (32.66), and 36 (4.98) Section 13: That portion of Tract 56 described as Lots 9 (2.29), 11 (7.34), 32 (40.00), 33 (12.45), 37 (10.18) and 39 (32.78) Section 13: That portion of Tract 57 lying in Section 13 more particularly described as Lots 8 (5.05), 34 (27.55) and 35 (22.60) Section 13: That portion of Tract 63 described as Lots 38 (2.24) and 40 (7.22) containing a total of 334.88 acres, more or less In accordance with Order No. 428-1 (as corrected) Order No. 428-1 (as corrected) reflects this as "Unit 6" containing 320.00 acres. The prior unit description does not include lands in Section 12 and does not reflect Lot 38 and 40 as being a portion of Tract 63

UNIT 1-14: Township 33 South, Range 44 West, 6th P.M. Section 14: W/2, more fully described as NE/4NW/4, Lots 1 (12.59), 4 (5.14), 5 (10.22), 7 (32.52), 19 (27.41), 20 (30.02) and 23 (7.27) Section 14: That portion of Tract 59 described as Lots 2 (27.38) and 3 (22.23) Section 14: That portion of Tract 58 described as Lots 6 (2.35), 8 (7.45), 17 (39.98), 18 (12.57), 21 (9.96) and 22 (32.71) containing a total of 319.80 acres, more or less Order No. 428-1 (as corrected) does not include Lots 2 and 3 in Tract 59 of Section 14; however, acreage reflected is correct on the prior unit description

UNIT 2-14: Township 33 South, Range 44 West, 6th P.M. Section 14: E/2, more fully described as N/2NE/4, Lots 9 (32.57), 12 (32.62), 25 (7.25) and 28 (7.23) Section 14: That portion of Tract 58 described as Lots 10 (5.09), 16 (27.48) and 24 (22.55) Section 14: That portion of Tract 57 described as Lots 11 (2.31), 13 (7.35), 14 (39.98), 15 (12.50), 26 (10.18) and 27 (32.75) containing a total of 319.86 acres, more or less In accordance with Order No. 428-1 (as corrected) No changes made to acreage included in this unit

UNIT 1-23: Township 33 South, Range 44 West, 6th P.M. Section 23: E/2 containing a total of 320.00 acres, more or less In accordance with Order No. 428-1 (as corrected) No changes made to acreage included in this unit

UNIT 2-23: Township 33 South, Range 44 West, 6th P.M. Section 23: W/2 containing a total of 320.00 acres, more or less In accordance with Order No. 428-1 (as corrected) No changes made to acreage included in this unit

UNIT 1-24: Township 33 South, Range 44 West, 6th P.M. Section 24: SW/4, and Lots 10 (27.60), 11 (29.84) and 14 (7.22) Section 24: That portion of Tract 63 described as Lots 8 (40.00), 9 (12.40), 12 (10.16) and 13 (32.78) containing a total of 320.00 acres, more or less In accordance with Order No. 428-1 (as corrected) No changes made to acreage included in this unit

UNIT 2-24: Township 33 South, Range 44 West, 6th P.M. Section 24: That portion of Tract 63 described as Lots 7 (27.60) and 15 (22.62) Section 24: Lots 5 (40.00), 6 (12.40), 16 (17.38), 17 (40.00), 27 (40.00), 28 (40.00), 29 (40.00) and 30 (40.00) containing 320.00 acres, more or less In accordance with Order No. 428-1 (as corrected) No changes made to acreage included in this unit

7. On November 22, 1999 a protest on the Application was filed on behalf of Ervin L. and Betty J. Hancock. On November 23, 1999 a written withdrawal of the protest was filed with the Commission.

8. At the time of the administrative hearing testimony was given by E.A.C. that on November 1, 1999 the Keystone #1-13 Well was completed in the Keyes Formation. This well is located in the SE1/4 NW1/4 of Section 13, Township 33 South, Range 44 West, 6th P.M. EAC plans to recomplete this well to the Cherokee Formation at some future date.

9. Testimony and exhibits presented at the administrative hearing described the lands on the north side of Section 13 which will be added to Unit 1-13 and Unit 2-13 as required by Order No. 428-2, and described the revised drilling and spacing unit designations as recommended by E.A.C.

10. At the time of the administrative hearing, E.A.C. agreed to be bound by oral order of the Commission.

11. Based on the facts stated in the verified application, having received one protest which was withdrawn, and having been heard by the Hearing Officer who recommends approval, the Commission should enter an order to reconfigure the above described units to include certain lands along the southern boundary of Section 12, Township 33 South, Range 44 West, 6th P.M. In addition, the Commission should approve the request to amend Order Nos. 428-1 and 428-2 to reflect new designations for the previously established 320-acre drilling and spacing units and to correct land descriptions and total acreage contained within certain units as listed above.

ORDER

NOW, THEREFORE IT IS ORDERED that the following rules and regulations shall apply hereafter to wells drilled, completed, or recompleted in the Cherokee Formation underlying lands in the Flank Northwest Field, herein described, in addition to other applicable rules and regulations and orders or the Commission, if any heretofore adopted and not in conflict herewith.

Rule 1. Drilling and spacing units or approximately 320-acres, more or less, are hereby established for the production of oil, gas and associated hydrocarbons from the Cherokee formation underlying the following described lands in the Flank Northwest Field, Baca County, Colorado, to-wit:

Township 33 South, Range 44 West, 6th P.M. Section 11: All Section 12: All, except Lots 52, 54, 56 and 58 Section 13: All, except Tracts 53 and 54, Lots 4, 17, 18, 28, 47, 48, 50, 52, and 54 Section 14: All Section 23: All Section 24: All, except Tract 64; Lots 4, 18, 21, 23, 24, 25, 26, 31, 32 and 33

Rule 2. Said drilling and spacing units and the permitted well locations with the tolerance of 200 feet in any direction to avoid surface hazards or obstructions are hereby designated and described as follows:

UNIT 1-11: Township 33 South, Range 44 West, 6th P.M. Section 11: W1/2, more fully described as the NW1/4, N1/2 SW1/4, SE1/4 SW1/4, Lots 8 (34.82) and 9 (5.15) containing a total of 319.97 acres, more or less Permitted well located in the center of the NW1/4 Section 11.

UNIT 2-11: Township 33 South, Range 44 West, 6th P.M. Section 11: E1/2, more fully described as the N1/2 NE1/4, Lots 1 (37.53), 3 (32.41), 7 (27.23), 10 (29.73) and 13 (7.44) and that portion of Tract 47 described as Lots 2 (2.44), 4 (7.56), 5 (39.97), 6 (12.74), 11 (10.24) and 12 (32.53) containing a total of 319.82 acres, more or less Permitted well located 1320 feet from the south line and 660 feet from the west line of Tract 47.

UNIT 1-12: Township 33 South, Range 44 West, 6th P.M. Section 12: Tract 52, also described as Lots 26 (2.42), 28 (7.56), 30 (5.14), 31 (27.24), 32 (40.00), 33 (12.75), 53 (10.01), 55 (32.56) and 57 (22.24) of said Section 12 Section 12: Tract 50, also described as Lots 20 (2.42), 22 (7.56), 24 (5.14), 34 (27.25), 35 (40.00), 36 (12.75), 48 (10.01), 49 (32.56) and 51 (22.55) of said Section 12 containing a total of 320.16 acres, more or less Permitted well located 1150 feet from the south line and 3330 feet from the east line in Section 12.

UNIT 2-12: Township 33 South, Range 44 West, 6th P.M. Section 12: That portion of Tract 51 lying within Section 12, also described as Lots 1 (27.05), 2 (40.00), 3 (13.00), 25 (10.31), 27 (32.44), 29 (22.00) of said Section 12 Section 12: Lots 4 (27.00), 5 (40.00), 6 (12.78), 19 (10.30), 21 (32.44) and 23 (22.13) containing a total of 289.45 acres, more or less Permitted well shall be located in accordance with Rule 318.

UNIT 3-12: Township 33 South, Range 44 West, 6th P.M. Section 12: That portion of Tract 48 lying within Section 12, more particularly described as Lots 7 (27.22), 8 (40.00), 9 (12.80), 13, (10.24), 15 (32.42) and 17 (22.14) Section 12: Lots 10 (27.20) and 11 (22.20) containing a total of 194.22 acres, more or less (federal and fee lands) Permitted well shall be located in accordance with Rule 318.

UNIT 4-12: Township 33 South, Range 44 West, 6th P.M. Section 12: Tract 49, also described as Lots 14 (2.42), 16 (7.58), 18 (5.14), 37 (27.25), 38 (40.00), 39 (12.75), 43 (10.01), 44 (32.56) and 46 (22.55) Section 12: That portion of Tract 47 lying within Section 12, more particularly described as Lots 12 (5.14), 40 (27.25) and 41 (22.55) containing a total of 215.20 acres, more or less (all fee lands) Permitted well shall be located in accordance with Rule 318.

UNIT 1-13: Township 33 South, Range 44 West, 6th P.M. Section 12: Lots 47 (7.44) and 50 (7.44) Section 13: Lots 5 (40.00), 6 (40.00), 12 (32.66), 15 (32.66), 44 (2.24) and 46 (7.22) Section 13: That portion of Tract 55 described as Lots 14 (2.29), 16 (7.34), 29 (40.00), 30 (12.45), 43 (10.18) and 45 (32.78) of said Section 13 Section 13: That portion of Tract 56 described as Lots 13 (5.05), 31 (27.55) and 41 (22.60) of said Section 13 Section 13: That portion of Tract 64 described as Lot 42 (4.98) of said Section 13 containing a total of 334.88 acres, more or less In accordance with Order No. 428-1 (as corrected) Permitted well located 1320 feet from the south line and 660 feet from the west line of Tract 55.

UNIT 2-13: Township 33 South, Range 44 West, 6th P.M. Section 12: Lots 42 (7.44) and 45 (7.44) Section 13: N1/2 NW1/4, Lots 7 (32.66), 10 (32.66), and 36 (4.98) Section 13: That portion of Tract 56 described as Lots 9 (2.29), 11 (7.34), 32 (40.00), 33 (12.45), 37 (10.18) and 39 (32.78) Section 13: That portion of Tract 57 lying in Section 13 more particularly described as Lots 8 (5.05), 34 (27.55) and 35 (22.60) Section 13: That portion of Tract 63 described as Lots 38 (2.24) and 40 (7.22) containing a total of 334.88 acres, more or less In accordance with Order No. 428-1 (as corrected) Permitted well, the No. 1-13 Hancock, located 1700 feet from the west line and 600 feet from the north line of Section 13.

UNIT 1-14: Township 33 South, Range 44 West, 6th P.M. Section 14: W1/2, more fully described as NE1/4 NW1/4, Lots 1 (12.59), 4 (5.14), 5 (10.22), 7 (32.52), 19 (27.41), 20 (30.02) and 23 (7.27) Section 14: That portion of Tract 59 described as Lots 2 (27.38) and 3 (22.23) Section 14: That portion of Tract 58 described as Lots 6 (2.35), 8 (7.45), 17 (39.98), 18 (12.57), 21 (9.96) and 22 (32.71) containing a total of 319.80 acres, more or less Permitted well located in the center of the NW1/4 Section 14.

UNIT 2-14: Township 33 South, Range 44 West, 6th P.M. Section 14: E1/2, more fully described as N1/2 NE1/4, Lots 9 (32.57), 12 (32.62), 25 (7.25) and 28 (7.23) Section 14: That portion of Tract 58 described as Lots 10 (5.09), 16 (27.48) and 24 (22.55) Section 14: That portion of Tract 57 described as Lots 11 (2.31), 13 (7.35), 14 (39.98), 15 (12.50), 26 (10.18) and 27 (32.75) containing a total of 319.86 acres, more or less Permitted well located 660 feet from the south line and 1320 feet from the west line of Tract 57.

UNIT 1-23: Township 33 South, Range 44 West, 6th P.M. Section 23: E1/2 containing a total of 320.00 acres, more or less Permitted well located in the center of the SE1/4 Section 23.

UNIT 2-23: Township 33 South, Range 44 West, 6th P.M. Section 23: W1/2 containing a total of 320.00 acres, more or less Permitted well located in the center of the NW1/4 Section 23.

UNIT 1-24: Township 33 South, Range 44 West, 6th P.M. Section 24: SW1/4, and Lots 10 (27.60), 11 (29.84) and 14 (7.22) Section 24: That portion of Tract 63 described as Lots 8 (40.00), 9 (12.40), 12 (10.16) and 13 (32.78) containing a total of 320.00 acres, more or less Permitted well located 1320 feet from the south line and 660 feet from the west line of Tract 63.

UNIT 2-24: Township 33 South, Range 44 West, 6th P.M. Section 24: That portion of Tract 63 described as Lots 7 (27.60) and 15 (22.62) Section 24: Lots 5 (40.00), 6 (12.40), 16 (17.38), 17 (40.00), 27 (40.00), 28 (40.00), 29 (40.00) and 30 (40.00) containing 320.00 acres, more or less Permitted well located in the center of Lots 27, 28, 29 and 30, being 1320 feet from the south line and 1320 feet from the west line of the 160-acre combined quarter section.

IT IS FURTHER ORDERED that the provisions contained in the above order shall become effective forthwith.

IT IS FUTHER 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 December, as of December 2, 1999.

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 December 17, 1999 ??

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