REPORT OF THE COMMISSION

Cause 458 came on for hearing before the Oil and Gas Conservation Commission on March 21, 1988 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 establishing 80-acre drilling and spacing units for the production of oil and associated hydrocarbons from the Morrow A' and B' Sand formations in certain lands of Cheyenne County, Colorado.

FINDINGS

The Commission finds as follows:

1. Union Pacific Resources Company as applicant herein, is an interested party in the subject matter of the above entitled 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. Testimony was presented to the Director as Hearing Officer which indicated the Morrow A' and B' Sand formations were separate but continuous formations underlying the requested area. The formations have very similar geologic and reservoir characteristics to those underlying Arapahoe Field as established in Order No. 449-1 and appear to be continuations of the same sands. Evidence presented indicates that the Morrow formation constitutes a common source of supply of oil and associated hydrocarbons underlying the following described lands in Cheyenne County, Colorado, to-wit: Township 14 South, Range 42 West, 6th P.M. Section 7: All Section 17: All Section 8: All Section 18: All Section 9: All Section 19: All Section 15: W/2 Section 20: All Section 16: All Section 29: E/2

5. In order to prevent waste of oil and gas as defined by law; to protect the correlative rights of all parties concerned to prevent the drilling of unnecessary wells;and,to insure proper and efficient development and promote conservation of the oil and gas resources, an order should be made establishing 80-acres, more or less, drilling and spacing units for the production of oil and associated hydrocarbons from the Morrow formation, a common source of supply underlying the lands described herein; that the units should consist of 80-acres, more or less, and consist of the E/2 and W/2, or the N/2 and S/2, of a governmental quarter section, with the unit described by the operator of the first well drilled in the quarter section. The permitted well for each unit should be located no closer than 460 feet from the unit boundaries, resulting in a rectangular location window of an approximate size of 400 feet by 860 feet. The designated well location should be in the NE/4 and SW/4 of each quarter section.

6. All available geological and engineering data concerning said Morrow formation indicates that one well will efficiently and economically drain an area of approximately 80-acres, more or less and that the drilling units of the size and shape hereinabove described are not smaller than the maximum area that can be efficiently and economically drained by one well producing from said Morrow formation.

7. All geologic and engineering testimony indicates the Morrow A' and B' Sands underlying the area described in Finding 4 herein above are the same common source of supply as the Morrow Sands described in Order No. 449-9 Finding 4, Arapahoe Field. These areas should be combined as Arapahoe Field with the added lands known as Area II, and Order No. 449-1 amended as appropriate.

8. Area II has productive zones which may penetrate a gas zone with a resulting high gas to oil ration. Additional information and testimony by the operators and interested parties should be presented for the Commission consideration by the May 16, 1988 hearing date.

9. This area should be included in Arapahoe Field as ordered in Order No. 449-1, and called Area II. Order 449-1 ordered the drilling and spacing units, designated units, and allowed exception well locations for Area I as listed in Rule 2 and 3, herein below.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the following rules and regulations shall apply hereafter to a well drilled, completed, or recompleted in the Morrow formation underlying the Arapahoe Field herein described, in addition to other applicable rules and regulations and orders of the Commission, if any, heretofore adopted and not in conflict herewith.

Rule 1. Eighty (80) acres, more or less, drilling and spacing units shall be and the same are hereby established for the production of oil and associated hydrocarbons from the Morrow formation underlying the following described lands in the Arapahoe Field, Cheyenne County, Colorado, to-wit:

AREA I Township 14 South, Range 42 West, 6th P.M.

Section 21: All Section 27: All Section 22: All Section 28: All Section 23': All Section 33: All Section 26: All Section 34: All Section 35: All AREA II

Township 14, South, Range 42 West, 6th P.M.

Section 7: All Section 17: All Section 8: All Section 18: All Section 9: All Section 19: All Section 15: W/2 Section 20: All Section 16: All Section 29: E/2

Rule 2. Said drilling units shall consist of 80-acres, more or less, and 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 following shall be the designated units: S/2 SW/4 Section 23, N/2 NE/4 Section 27, S/2 NE/4 Section 27 and the N/2 NW/4 Section 27, Township 14 South, Range 42 West, 6th P.M.

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(449-6)

Rule 3. 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. Well No. 27-1 Arapahoe, located in SE/4 NW/4 of said Section 27 shall be considered an exception and be the permitted well for the unit consisting of the S/2 NW/4 of said Section. Well No. Funk A', located in the S/2 S/2 NE/4 of said Section 26 shall also be considered an exception and be the permitted well for the unit consisting of the S/2 NE/4 of said Section.

Rule 4. For Area II the permitted well location shall be in the NE/4 and the SW/4 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.

IT IS FURTHER ORDERED, that the operators of producing wells in Arapahoe Field Area II shall present testimony concerning production practices and potential restrictions at the earliest possible time but no later than May 16, 1988. This testimony may be heard by the Director as Hearing Officer.

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

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

Entered this 6th day of 1988, as of March 21, 1988. / //'

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO By Dennis R. Bicknell, Secretary

(449-6)

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