REPORT OF THE COMMISSION

This cause came on for hearing before the 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 Fina Oil and Chemical Company for an order involuntarily pooling all interests in the unit consisting of the E/2 SW/4 Section 6, Township 8 North, Range 58 West, 6th P.M., Weld County, Colorado for operation and development of the Cretaceous D' Sand formations underlying said unit.

FINDINGS

The Commission finds as follows:

1. Fina Oil and Chemical 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 aspects 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 authorized Order No. 451-1 to be issued by which 80-acre drilling and spacing units were establisbed for production of oil and associated hydrocarbons from the D' Sand-' formation underlying certain, lands in the Lilli Field, Weld County, Colorado. The units consist of 80-acres, more or less, and shall consist of the E/2 and W/12 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.

5. In order to insure proper and efficient development of each spacing unit and to promote conservation of the oil and gas resources of the State, an order should be made pooling all interests in the spacing unit.

6. An order of the Commission pooling all interests in a spacing unit is necessary, in the absence of a voluntary pooling agreement and upon application of an interested party, in order to afford each owner of an interest in said unit the opportunity to recover and receive his just and equitable share of the oil and associated hydrocarbons from the common source of supply underlying said unit.

7. Production obtained from each spacing unit should be allocated to each mineral owner therein on the basis of the proportion that the number of net mineral acres owned by each owner bears to the total number of mineral acres within said unit.

8. Testimony presented at the time of hearing indicated that the E/2 of the SW/4, Section 6, consists of Lot 12 and Lot 15, with a dispute of the mineral interest by Texaco in Lot 12. A quiet title suit has been filed with the appropriate court. Resolution of this suit may take several years. Drilling and production from the D' Sand formation is occurring in Section 6 at the time of hearing, resulting in probable drainage from this unit.

9. Texaco, Inc. as a non-consenting unleased mineral owner, was furnished an Approval for Expenditure on April 8, 1988 for a well to be drilled in the SE/4 SW/4 Section 6, Township 8 North, Range 58 West, 6th P.M., Weld County, Colorado, and Texaco, Inc., at the time of hearing waived the thirty (30) day consent period required for drilling of the well and to participate in the cost thereof.

ORDER

NOW THEREFORE IT IS ORDERED, that:

1. Pursuant to the provisions of 34-60-116 C.R.S., as amended, of the Oil and Gas Conservation Act of the State of Colorado, all interests in the drilling and spacing unit consisting of the E/2 SW/4 of Section 6, Township 8 North, Range 58 West, 6th P.M. are hereby pooled for the development of oil, gas and associated hydrocarbons from the D' Sand formation.

2. The production obtained from each said drilling unit shall be allocated to each owner therein on the basis of the proportion that the number of net mineral acres owned by them in the unit to the total number of mineral acres within said drilling unit; each owner of an interest in each said unit shall be entitled to receive his share of the production of the well located in each said drilling unit applicable to his interest in said drilling unit.

3. Each unleased mineral owner should be afforded the opportunity to consent to the drilling of the proposed well on each spacing unit and to elect whether to participate in the drilling and operating of said well, and pay his or her proportionate share of the actual costs thereof, which proportionate share shall be determined as set forth in Rule 2 above.

4. Within thirty (30) days from the date of receipt of said AFE by the unleased mineral owner, such mineral owner shall indicate whether he consents to the drilling of the well and agrees to participate in the cost thereof. Such election shall be made in writing, either by executing the AFE or similar document. In the event a written election to participate is not made by an unleased mineral owner within such time period, said unleased mineral owner shall be deemed to have elected not to participate and shall therefore be deemed to be non-consenting as to the costs of drilling, completing and producing the well.

5. Each non-consenting unleased mineral owner within each 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 the interest may be, until such time as the consenting owners recover out of production, only 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 8/8 share of the well, surface facilities and production, and then be liable for his proportionate share of further costs incurred in connection with the well as if he had originally agreed to the drilling.

6. If during the pending of any litigation over mineral ownership in said units, a bona fide dispute arises as to the proper proceeds in dispute, such proceeds shall either be escrowed by the operator, or paid into the registry of the appropriate court pending resolution of the dispute concerning ownership figures.

7. The designated operator of the wells to be drilled on the unit for the purpose of this pooling order shall be the applicant, Fina Oil and Chemical Company.

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IT IS FURTHER ORDERED, that the provisions contained in the above order shall become 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 fifth day of May 1988, as of April 16, 1988.

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

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