REPORT OF THE COMMISSION

            This cause came on for hearing for before the Oil and Gas Conservation Commission on April 18, 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 verified application of Union Pacific Resources Company to establish production restrictions for the production of gas from the Morrow A' and B' Sandstone Formations in Arapahoe Field, Area II, Cheyenne County, Colorado as established in Commission Order No. 449-6.

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 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. By Order No. 449-1, 80-acre drilling and spacing units were established, and Order No. 449-5 established restrictions for production of gas in the below listed Area I. By Order No. 458-1 an additional area (Area II) was added to Arapahoe Field, and Order No. 449-6 established 80-acre drilling and spacing units and required the operators of producing wells in Area II to present testimony concerning production practices and potential restrictions at the earliest possible time, but no later than May 16, 1988.

                    AREA I

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

Section 21: All

Section 22: All

Section 23: All

Section 26: All

Section 27: All

Section 28: All

Section 33: All

Section 34: All

Section 35: All

AREA II

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

Section 7: All

Section 8: All

Section 9: All

Section 15: W/2

Section 16: All

Section 17:All

Section 18:All

Section 19:All

Section 20:All

Section 29:E/2

                5. Testimony was presented to the Director as Hearing Officer which indicated that production restrictions should result in higher primary recovery of the hydrocarbons in place in an economical and efficient manner, and protect the correlative rights of all concerned.

                6. A maximum allowable of 100 MCF of gas per day, based a monthly average, per 80-acre unit leaving the unit should be imposed the production of all well within the Arapahoe Field, Area II, and shall be measured by an orifice and recording meter in accordance with Rule 331 of the Colorado Oil and Gas Commission. Regular production reports should be made by each operator to the Commission in accordance with Rule 307, of the Colorado Oil and Gas Conservation Commission and copies distributed to the other operators in the field by.

                7. For the determination of the monthly gas production attributable to each well, and for the case when production is to a central lease battery, each well should be allocated a theoretical production volume based on a monthly production test of the well. This will be done by calculating the theoretical production percent for each well in the lease and multiplying that percent by the total monthly lease production to give the total monthly individual well production.

                8. Overproduction should be made up during the month following overproduction and should not exceed one (1) month's allowable. Underproduction should be made up within two (2) month's following the month of underproduction. Should more than one well produce from the same 80-acre unit, cumulative gas production from the wells should be restricted to 100 MCF per day.

                9. The above restrictions and practices should remain in effect for four months at which time all operators in the field should report to the Commission at its August hearing with additional information, including production data.

                10. One fifteen day test period during initial completion at appropriate rate determined by the individual operator should be allowed if requested of and approved by the Director.

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 22: All

Section 23: All

Section 26: All

Section 27: All

Section 28: All

Section 33: All

Section 34: All

Section 35: All

                    AREA II

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

Section 7: All

Section 8: All

Section 9: All

Section 15: W/2

Section 16: All

Section 17:All

Section 18:All

Section 19:All

Section 20: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.

                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/2 of said Section. Well No. Funk A', located in the S/2 S/12 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.

                    Rule 5. Commencing February 12, 1988 for wells in Area I and April 18, 1988 for wells in Area II a production restriction shall be imposed on each well of 100 MCF per day per 80-acre unit based on the average monthly gas volume leaving the lease.

                    Rule 6. Such gas shall be measured by an orifice and recording meter installed on the line where such gas leaves the lease in accordance with Rule 331 of the Rules and Regulations of the Oil and Gas Conservation Commission. Reports shall be made monthly to the Commission in accordance with Rule 307 of the Rules and Regulations of the Oil and Gas Conservation Commission, and copies distributed in a timely fashion to all other operators in the field by each operator of their own wells.

                    Rule 7. Each well shall be tested on a monthly basis.

                    Rule 8. Overproduction of the allowable shall be made up during the month following overproduction. Overproduction shall not exceed one (1) month's production. Underproduction shall be made up within two (2) months following the month of underproduction or be lost.

                    Rule 9. Should more than one well be produced from the same 80-acre spaced unit, cumulative gas volumes leaving the lease shall be restricted to 100 MCF per day.

                    Rule 10. One fifteen day test period during initial completion at an appropriate rate determined by the individual operator shall be allowed if requested and approved by the Director.

                    IT IS FURTHER ORDERED, that the restriction shall remain in effect for a period of four months until the August 1988 hearing of the Commission and that operators and any interested party in the Arapahoe Field shall appear with additional information including production data thru July 31, 1988.

                    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 order.

                    ENTERED this 4th day of May 1988, as of April 16, 1988.

                    THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

                    By Dennis R. Bicknell, Secretary