REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on July 18, and 19, 1988 at 8:30 am. in Room 101, Education Building, 201 East Colfax, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified application of Mull Drilling Company, Inc. et al for an order granting an exception to the permitted well location as provided for by Order No. 449-6 for a well to be drilled in the spacing unit consisting of the N/2 NE/4 in the NW/4 NE/4 Section 34, Township 14 South, Range 42 West, 6th P.M., after drilling and plugging a well drilled in the prescribed location in the NE/4 NE/4 of Section 34.

Hearing in the above matter was originally scheduled for the June 17, 1988 hearing and was rescheduled to the July 18, 1988 hearing on the motion of the Commission due to insufficient time at the June hearing. A protest to the application was filed by Medallion Petroleum, Inc., and a protest by Union Pacific Resources Company.

FINDINGS

The Commission finds as follows:

1. Mull Drilling Company, Inc., 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 the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order.

4. On March 21, 1988 the Commission authorized Order No. 449-6 to be issued which established 80-acre drilling and spacing units for the production of oil and associated hydrocarbons from the Morrow A' and B' Sand formations underlying the below listed lands in Cheyenne County, Colorado. The units shall consist of the E/2 and W/2 or the N/2 and S/2 of a governmental quarter section, with the unit designated by the operator of the first well drilled in the quarter section. For Area I the permitted well location shall be in the center of the NE/4 and the SW/4 of each quarter section with a tolerance of 200 feet in any direction. For Area II the permitted well location shall be in the NE/4 and SW/14 of each quarter section and shall be no closer than 460 feet from the unit tract boundaries, resulting in a rectangular location window of an approximate size of 400 feet by 860 feet. Township 14, South, Range 42 West, 6th P.M.

AREA I AREA II Section 21: All Section 27: All Section 7: All Section 17: All Section 22: All Section 28: All Section 8: All Section 18: All Section 23: All Section 33: All Section 9: All Section 19: All Section 26: All Section 34: All Section 15: W/2 Section 20: All Section 35: All Section 16: All Section 21: All

5. On April 18, 1988, the Commission authorized Order No. 449-7 to be issued which established production practices and restrictions on wells producing gas from the Morrow A' and B' in both Area I and Area II.

6. The protest of Union Pacific Resources Company was verbally withdrawn at the hearing.

7. Testimony presented at the hearing indicated that the Williams No. 1. in the NE/4 NE/4 was drilled and abandoned as a dry hole. Geologic testimony indicated that well drilled at the requested location should encounter sufficient sand to justify a completion attempt. Engineering testimony indicated that production volumes would be sufficient to allow an economic and efficient operation.

8. Further testimony was presented that showed in order for the applicant to obtain his share of production from the pool, avoid drainage and protect correlative rights, an exception to the permitted well location as provided for in Order No. 449-7 should be allowed for a well to be drilled in the spacing unit consisting of the N/2 NE/4 at a location in the NW/4 NE/4 Section 34, Township 14 South, Range 42 West, 6th P.M., Arapahoe Field, Cheyenne County, Colorado for the production of oil and associated hydrocarbons from the Morrow A' and B' Sandstone Formations.

9. Should a commercial well be completed at the exception location, production from said well should be restricted in accordance with the provisions of Order No. 449-7.

10. Consideration of further production restrictions as requested in the protest should be considered at a subsequent hearing of the Commission. 11. If a commercial well is completed at the location set forth above, the Commission, upon application of any interested person, take such action as will offset any advantages which the person securing the exceptions may have over other procedures by reason of drilling the well as an exception, including suitable provisions to prevent the production from the well drilled as an exception of more than its just and equitable share of the oil and gas in the pool.

12. This Order should be effective fifteen days after hearing which is August 3, 1988.

ORDER

NOW, THEREFORE IT IS ORDERED, that an exception to the permitted well location as provided for in Order No. 449-7 is hereby granted for a well to be drilled in the spacing unit consisting of the N/2 NE/4 at a location in the NW/4 NE/4 of Section 34, Township 14 South, Range 42 West, 6th P.M., Arapahoe Field, and that it be the permitted well for the unit upon which it is located for the production of oil and associated hydrocarbons form the Morrow A' and B' Sandstone Formations and the production shall be in accord with Order No. 449-7.

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IT IS FURTHER ORDERED, that this Order be effective on August 3, 1988.

IT IS FURTHER ORDERED, that if a commercial well is completed at the location set forth above, the Commission shall, upon application of any interested person, take such action as will offset any advantages which the person securing the exception, may have over other producers by reason of drilling the well and an exception, including suitable provisions to prevent the production from the well drilled as an exception of more than its just and equitable share of the oil and gas in the pool.

ENTERED this' 10th day of August 1988, as of August 3, 1988.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Dennis R. Bicknell, Secretary

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