REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on August 20, 1990 at 8:30 a.m. in Room 101, State Education Building, 201 East Colfax, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified application of Trans-Western Petroleum, Inc. for an order granting an exception to the permitted well location as provided for by Order No. 449-20 (Corrected) for a well to be drilled in the spacing unit consisting of the N/2 SE/4, Section 28, Township 13 South, Range 42 West, 6th P.M. at a location 330 feet FEL and 1650 feet FSL, and for an order pooling all interests in the drilling and spacing unit consisting of the N/2 SE/4 of said Section 28 for the development and operation of the Morrow formations underlying said unit and the production of oil and associated hydrocarbons from said formation, pursuant to the provisions of 34-60-116 C.R.S., 1984.

FINDINGS

The Commission finds as follows:

1. Trans-Western Petroleum, Inc., as applicant herein, is an interested party in the subject matter of the above-referenced matter.

2. Due Notice of 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 order.

4. On September 19, 1988 the Commission authorized Order No. 449-20 (Corrected) 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 Arapahoe Field 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. 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.

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5. Order No. 449-20 (Corrected) also established production practices and restrictions on wells producing from the Morrow 'A' and 'B' in Arapahoe Field, and restricted production amounts of exception wells to fifty percent (50%) of the amounts for wells at the permitted locations.

6. Based on the facts stated in the verified application, no protests being filed, and having been heard by the Director as Hearing Officer on August 17, 1990, the Commission should enter an order granting an exception for a well to be drilled in the spacing unit consisting of the N/2 SE/4 at a location 330 feet FEL and 1650 feet FSL, Section 28, Township 13 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' Sand formation.

7. Should a commercial well be completed at the above exception location, production from said well should be restricted to fifty percent (50%) that allowed at a well producing at a permitted location.

8. That the Hearing Officer further recommended that the Commission should enter an order pooling all interests in the 80-acre drilling and spacing unit herein described for the operation and development of the Morrow 'A' and 'B' Sand formation underlying said unit for the production of oil and associated hydrocarbons.

9. Efforts have been made to obtain the voluntary pooling of all interests including the tendering by the Applicant of the

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proposals required by Commission Rule 533 by letter by the Applicant dated June 22, 1990. No response to these letters have been obtained and there has not been a voluntary pooling of all interests.

10. 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.

ORDER

NOW, THEREFORE IT IS ORDERED, that an exception to the permitted well location as provided for in Order No. 449-20 (Corrected) is hereby granted for a well to be drilled in the spacing unit consisting of the N/2 SE/4 Section 28 at a location 330 feet FEL and 1650 feet FSL, Section 28, Township 13 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' Sand formations, and that production shall be restricted to fifty percent (50%) of the volumes allowed for a well at the permitted location.

IT IS FURTHER ORDERED, that, 1. Pursuant to the provisions of 34-60-116, C.R.S., 1984, of the Oil and Gas Conservation Act of the State of Colorado, all interests in the drilling and spacing unit consisting of the N/2 SE/4 Section 28, Township 13 South, Range 42 West, 6th P.M. Cheyenne County, Colorado, are hereby pooled for the development of oil and associated hydrocarbons from the Morrow 'A' and 'B' Sand 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 owners who received the proposals stated in Finding 9, above, are deemed to have elected to not participate and shall, therefore, be deemed to be non-consenting as to the well and be subject to the penalties provided by C.R.S. 34-60-116 (7).

4. Any non-consenting 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 C.R.S. 34-60-116 (7)(b), 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

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liable for his proportionate share of further costs incurred in connection with the well as if he had originally agreed to the drilling.

5. The designated operator of the well for the unit, N/2 SE/4 Section 28, Township 13 South, Range 42 West, 6th P.M. for the purpose of this pooling order shall be Trans-Western Petroleum, Inc.

IT IS FURTHER ORDERED, that the provisions contained in the above order shall be effective forthwith retroactive to the date that costs were incurred in the drilling of the well and that the remaining provisions are 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 ,

1990, as of August 20, 1990.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO Dated at Suite 380 1580 Logan Street Denver, Colorado 80203 By 0554I Dennis R. Bicknell, Secretary

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