REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on March 15, 1993 at 8:30 a.m. in Room 101, State Education Building, 201 East Colfax Avenue, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified application of Marathon Oil Company for an order terminating the Southwest Stockholm Unit authorized by Commission Order No. 442-2 and simultaneously and concurrently approving a certain Unit Agreement and Unit Operating Agree ment for the Stockholm (Morrow) Unit, providing for unit operations of the reservoir consisting of the Morrow Formation underlying that portion of the lands in the unit area located in Cheyenne County, Colorado. The remaining unit area is located on certain lands in Greeley and Wallace Counties, Kansas.

FINDINGS

The Commission finds as follows:

1. Marathon Oil 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 Commission entered Order No. 442-2 on September 21, 1987 approving the Southwest Stockholm South (Morrow) Unit Agreement and Unit Operating Agreement for the following described lands in Cheyenne County, Colorado:

Township 16 South, Range 41 West, 6th P.M. Section 8: Lots 5 and 6 (a.d.a. S1/2)

The remaining lands in the Unit Area are located in Greeley County, Kansas and consist of the following described lands:

Township 16 South, Range 93 West, 6th P.M. Section 11: All Section 12: N1/2, SW1/4

5. The Morrow Formation was encountered in the stratigraphic interval between the depths of 5,004 feet and 5,162 feet measured from the kelly bushing 13 feet above ground level, in the Berquist No. 5 Well located in the SW1/4 NW1/4 NE1/4 of Section 6, Township 16 South, Range 42 West, Greeley County, Kansas, and as so encountered, is a common source of supply and has been defined and determined by drilling, to be productive underlying the following descr ibed lands in Cheyenne County, Colorado:

Township 16 South, Range 41 West, 6th P.M. Section 8: Lots 5 and 6 (a.d.a. S1/2)

The remaining lands in the Stockholm Unit Area are located in Greeley and Wallace Counties, Kansas and consists of the following described lands:

Township 16 South, Range 42 West, 6th P.M., Greeley County Section 6: Lots 1,2,3,4,5,6,7 and E1/2 SW1/4, SE1/4, E1/2 NE1/4, and SE1/4 NW1/4

Section 7: Lots 1 and 2, and E1/2 NW1/4

Township 16 South, Range 43 West, 6th P.M., Greeley County Section 1: SE1/4, N1/2, and SW1/4

Township 15 South, Range 42 West, 6th P.M., Wallace County Section 29: W1/2, SW1/4 SE1/4, SE1/4 SE1/4, and NW1/4 SE1/4 Section 30: Lots 1 and 2, and E1/2 NW1/4, NE1/4, W1/2 SE1/4, SE1/4 SE1/4, and NE1/4 SE1/4 Section 32: All Section 33: SW1/4 and W1/2 NW1/4

Township 15 South, Range 43 West, 6th P.M., Wallace County Section 25: Lots 1 and 2

Township 15 South, Range 42 West, 6th P.M., Wallace County Section 19: Lots 3 and 4, and SE1/4 and E1/2 SW1/4

Township 15 South, Range 43 West, 6th P.M., Wallace County Section 24: Lots 3 and 4

Township 16 South, Range 43 West, 6th P.M., Greeley County Section 11: Lots 1, 2, 3 and 4, and E1/2 Section 12: N1/2 and SW1/4

6. The terms and conditions provided by the Stockholm (Morrow) 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 a secondary recovery program by the injection of gas and water into the Morrow Formation reservoir underlying the Stockholm (Morrow) Unit Area, as described her ein is necessary to increase the ultimate recovery of oil and gas and the value of the estimated additional recovery of oil and gas exceeds the estimated additional cost incident to conducting such operations.

7. 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 Stockholm (Morrow) Unit Area of all the oil and gas that is produced from said Unit Area and is saved;

d. The provision for the credits and charges to be made in the adjustment among the owners in the Stockholm (Morrow) 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 capitol 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 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.

8. Based on the facts stated in the verified application, and having been heard by the Hearing Officer and recommended for approval, the Commission should enter an order concurrently and simultaneously rescinding Order No. 442-2 and approving the amended Stockholm (Morrow) Unit Agreement and Unit Operating Agreement effective April 1, 1993.

ORDER

NOW, THEREFORE, IT IS ORDERED, that Order No. 442-2 issued by the Commission on October 15, 1987 is hereby rescinded effective April 1, 1993.

IT IS FURTHER ORDERED, that; 1. The Stockholm (Morrow) Unit Agreement and Unit Operating Agreement, as amended, covering lands in the Stockholm (Morrow) Unit Area, which agreements are attached to, and made a part of the original order of this Commission on file in the office of the Commission, are approved as being in the public interest for conservation.

2. The Morrow reservoir, common source of supply, underlies the following lands in Cheyenne County, Colorado:

Township 16 South, Range 41 West, 6th P.M. Section 8: Lots 5 and 6 (a.d.a. S1/2)

The remaining lands in the Unit Area are located in Greeley and Wallace Counties, Kansas and are described in Finding 5 herein above.

3. The provisions contained in said Unit Agreement and Unit Operating Agreement as they pertain to C.R.S. 34-60-118 of the Oil and Gas Conservation Act are just and reasonable, and are incorporated herein as the Commission's plan of unit operations for such lands.

4. The secondary recovery project by the injection of gas and water into the Morrow Reservoir of said Unit Area, as presented by the applicant, is hereby approved as being necessary to increase the ultimate recovery from said reservoir.

5. Any injection well to be located in the Colorado portion of the Unit Area shall be approved by the Director in accordance with the rules and regulations of the Commission.

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective April 1, 1993.

IT IS FURTHER ORDERED, that the Commission expressly reserved it rights, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.

ENTERED this day of March, 1993, as of March 15, 1993.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary

Dated at Suite 380 1580 Logan Street Denver, Colorado March 25, 1993 ??

(442-4)