REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on May 16, 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 TXO Production Corp. for an order authorizing the re-injection of natural gas, pursuant to Rule 401 of the Rules and Regulations of the Commission into the Morrow formation from which the gas is originally produced at the Steele "B" #1 well located in Section 6, Township 15 South, Range 41 West, 6th P.M. A protest was filed by Mull Drilling Company, Inc. et al by its attorney.

FINDINGS

The Commission finds as follows:

1. TXO Production Corp., 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 January 13, 1988, the Commission issued Order No. 456-1 which established 40-acre drilling and spacing units for the production of oil and associated hydrocarbons from the Morrow "B" formation and Maximum Daily Production Rates for each well in the Arapahoe East Field, Cheyenne county, Colorado.

5. Rule 401 of the Rules and Regulations of the Commission requires written authorization from the Commission prior to any enhanced recovery operations, cycling or re-cyclying operations including the extraction and separation of liquid hydrocarbons from natural gas, or operations for the storage of gasoline or liquid hydrocarbons, among other things.

6.Through the use of exhibits and testimony at the time of hearing, areas in the field were shown to have gas of varying volume. similar operation was conducted in the same reservoir in Kansas with inconclusive results. Gas migration onto other leases distant from the proposed injection site with subsequent well and reservoir damage was postulated.

7. The application should therefore be denied.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the application of TXO Production Corp. to re-inject natural gas into the Morrow formation from which it is originally produced at the Steele "B" #1 well in the Arapahoe East Field, Cheyenne County, Colorado is hereby denied.

ENTERED this 26th day of May 1988, as of May 16, 1988.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Dennis R. Bicknell, Secretary