IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE LILLI FIELD, WELD COUNTY, COLORADO Cause No. 451 Order No. 451-5

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on February 12, 1988 at 9:00 A.M., in Room 110, State Centennial Building, 2313 Sherman Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified application of Diversified Operating Company for an order granting an exception to the permitted well location as provided for by Order No. 451-1 for a well to be drilled in the S/2 NW/4 Section 8, Township 8 North, Range 58 West, 6th P.M. at a location no closer than 300 feet from the boundaries of said unit. Hearing in the above matter was originally scheduled for the December 21, 1987 hearing and was rescheduled for the January 13, 1988 hearing and was rescheduled for the February 12, 1988 hearing upon written requests by the applicants attorney. A protest was filed by Berenergy Corporation by its attorney.

FINDINGS

The Commission finds as follows:

1. Diversified Operating 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. On August 17, 1987, the Commission issued Order No. 451-1, which among other things, established 80-acre drilling and spacing units for the production of oil and associated hydrocarbons from the D' Sand formation underlying the lands in the Lilli Field, with the permitted well located in the center of the NW/4 and SE/4 of each quarter section with a tolerance of 200 feet in any direction. Exceptions to the permitted well locations may be granted by the Director, provided owners of the contiguous and cornering units file a waiver or consent in writing agreeing to such exception.

5. Based on the facts stated in the verified application, exhibits submitted, the protest being withdrawn, and having been heard by the Director as Hearing Officer on February 11, 1988, the Commission should enter an order granting an exception for a well to be drilled at a location 1670 feet from the North line and 1670 feet from the West line within the S/2 NW/4 of Section 8, Township 8 North, Range 58 West, 6th P.M. and that it be the permitted well for the unit upon which it is located, and should said well be completed as a producing well in the D' Sand formation, the production rate of the well will be in accordance with the agreement between Diversified Operating Company and Berenergy Corporation.

ORDER

NOW, THEREFORE IT IS ORDERED, that an exception is hereby granted for a well to be drilled at a location 1670 feet from the North line and 1670 feet from the West line Section 8, Township 8 North, Rang 58 West, 6th P.M., Lilli Field, Weld County, Colorado, 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 D' Sand formation.

IT IS FURTHER ORDERED, that the above order shall become effective forthwith.

Entered this 23rd day February 1988, as of February 12, 1988.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO By Frank J. Piro, Secretary

(451-5)