IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE STATELINE MORROW "B" COLORADO Cause No. 456 Order No. 456-1 AREA, CHEYENNE COUNTY, )

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on January 13, 1988 at 9:00 A.M. in Room 110, State Centennial Building, 1313 Sherman Street, Denver, Colorado, on the verified application of Union Pacific Resources Company for an order to establish 40 acre drilling and spacing units for production from the Morrow B' formation underlying certain lands along the Colorado-Kansas border and further to establish a Maximum Production Rate on wells located on such lands.

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. The Kansas Commission has established 40 acre drilling and spacing units for production from the Morrow B' formation underlying certain lands adjacent to the Colorado border. In addition, a production allowable was imposed. Therefore the following order is needed to protect the correlative rights of owners in Colorado and prevent waste.

5. Evidence presented at the time of hearing indicates that the Morrow B' formation constitutes a common source of supply of oil and associated hydrocarbons underlying the following described lands i, Cheyenne County, Colorado:

AREA A'

Township 14 South, Range 41 West, 6th P.M. Section 30: S/2 Section 31: All Township 15 South, Range 41 West, 6th P.M. Section 6: All

AREA B'

Township 14 South, Range 42 West, 6th P.M. Section 25: SE/4 Section 36: E/2 Township 15 South, Range 42 West, 6th P.M. Section 1: E/2

6. That in order to prevent the waste of oil and gas, as defined by law; to protect the correlative rights of all parties concerned; to prevent the drilling and unnecessary wells, and to insure proper and efficient development and promote conservation of the oil and gas resources of the State, an order should be made establishing 40 acre drilling and spacing units for the production of oil and associated hydrocarbons from the Morrow B' formation, common source of supply underlying the lands described herein; that said units as described in Area B' should consist of 40 acres, more or less, and consist of a quarter-quarter section according to the governmental survey with the permitted well located no closer than 460 feet to the boundaries of the quarter-quarter section. As to Area A', described herein above, the unit, where possible, should consist of a 40 acre tract a minimum of 920 feet in width and the length should be as required to constitute an attribution of 40 contiguous acres. Each such acreage attribution should be rectangular or square in shape. The permitted well should be at a location no closer than 460 feet from the boundaries of the attributed acreage tract. In those situations where there are small governmental tracts adjacent to the Colorado - Kansas border within Area A' which are less than 920 feet in width, the permitted well should be at a location as nearly as practical in the center of the tract from east to west, but no closer than 460 feet from the north and south boundary of the acreage attribution unit. The length of any such attribution unit should not exceed 1320 feet.

7. All allowable geological and engineering data concerning said Morrow B' formation indicate that one well will efficiently and economically drain an area of approximately 40 acres and that the drilling units of the size and shape herein above described are not smaller than the maximum area that can be efficiently and economically drained by one well producing from said formation.

ORDER

NOW, THEREFORE IT IS ORDERED that the following rules and regulations shall apply hereafter to a well or wells drilled, completed, or recompleted in the Morrow B' formation underlying the Stateline Morrow B' Area, 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. Forty (40) acre drilling and spacing units shall be and the same are hereby established for the production of oil and associated hydrocarbons from the Morrow B' formation underlying the following described lands in Cheyenne County, Colorado: AREA A' Township 14 South, Range 41 West, 6th P.M. Section 30: S/2 Section 31: All Township 15 South, Range 41 West, 6th P.M. Section 6: All

AREA B'

Township 14 South, Range 42 West, 6th P.M. Section 25: SE/4 Section 36: E/2 Township 15 South, Range 42 West, 6th P.M. Section 1: E/2

Rule 2. Said drilling units located in Area B, described herein above, shall consist of 40 acres, more or less, and shall consist of a quarter-quarter section according to the governmental survey. The permitted well shall be at a location no closer than 460 feet from the boundaries of the quarter-quarter section.

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Rule 3. Said drilling units located in Area A, described herein above, shall where possible, consist of a 40 acre tract, a minimum of 920 feet in width and the length shall be as required to constitute an attribution of 40 contiguous acres. Each such acreage attribution shall be rectangular or square in shape. The permitted well shall be at a location no closer than 460 feet from the boundaries of the attributed acreage tract. In those situations where there are small governmental tracts adjacent to the Colorado - Kansas border within Area A' which are less than 920 feet in width, the permitted well shall be at a location as nearly as practical in the center of the tract from east to west, but no closer than 460 feet from the north and south boundary of the acreage attribution unit. The length of any such attribution unit shall not exceed 1320 feet.

Rule 4. For each well in Area A' & B', there shall be established a maximum daily production rate ("Maximum Daily Production Rate") which shall be calculated based on the following formula:

Attributable Acreage = Length of Unit X Width of Unit ------------------------------43,560

Acreage Factor = Attributable Acreage --------------------40

Allowable = 200 bb/oi/day X Acreage Factor

Rule 5. The Maximum Daily Production Rate for each well shall be further limited to 100 MCF of gas per day removed from the lease and shall have reached its Maximum Daily Production Rate even though it may not have produced its Maximum Daily Rate of oil under the above described formula. Where there are more or less than 40 acres attributed to the well, the produced gas limitation shall be proportionately adjusted by the average percentage factor for the well.

Rule 6. Under production may be made up only during the month following the month in which it occurred, and any over production, which shall not exceed ten (10) percent of the allowable, shall be made up in the month following such over production.

IT IS FURTHER ORDERED that, within thirty (30) days of the effective date of this Order, the operators of all wells drilled and completed in Area A' and B', herein above described, shall file with the Director an acreage attribution plat and a supervised test for each such well. The method of such testing shall be in accordance and approval of the Director.

IT IS FURTHER ORDERED that, the provisions of the above orders shall become effective forthwith.

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

Entered this eleventh day of February 1988, as of January 13, 1988.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary

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