REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on July 19, 1993, in Room 318, State Centennial Building, 1313 Sherman Street, Denver, Colorado, after giving Notice of Hearing, as required by law on the application of Union Pacific Resources Company, for an order to designate the Morrow Sandstone Formation into two separate sources of supply for Sections 1 and 2, Township 18 South, Range 42 West, 6th P.M. in the Jace Field, in accordance with the sp acing and well location provisions in Order No. 471-1. In addition, the applicant requests that the Director be allowed to grant exceptions to the permitted well locations for the below-described lands provided waivers are filed by the mineral owners or leaseholders toward whom a location is being moved.

FINDINGS

The Commission finds as follows:

1. Union Pacific Resources Company as applicant herein, are interested parties 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. In Order No. 471-1 issued August 21, 1989, the Commission established 80-acre drilling and spacing units for the production of oil and associated hydrocarbons from the Morrow Sandstone Formation, including Sections 1 and 2, Township 18 South, Range 42 West, 6th P.M. Said units consist of the E1/2 and the W1/2 or the N1/2 and the S1/2 of a governmental quarter section, with the permitted well to be located no closer than 600 feet from the boundaries of the unit and no closer than 1200 feet from any other producible or drilling well when producing from or drilling into the Morrow Sandstone Formation.

5. That the stratigraphic equivalent for the Morrow V-6 Sandstone is found in the Dual Induction log for the Pierson No. 1-1 Well located in the NE1/4 SW1/4 of Section 1, Township 18 South, Range 42 West, 6th P.M., and the stratigraphic equivalent for the Morrow V-7 Sandstone is found in the Dual Induction log for the Schneider No. 34-1 Well located in the SW1/4 SE1/4 of Section 1, Township 18 South, Range 42 West, 6th P.M. and defined as follows:

Morrow V-6 Sandstone 5130 feet to 5162 feet Morrow V-7 Sandstone 5148 feet to 5168 feet

6. That 80-acre drilling and spacing units and well location requirements in Order No. 471-1 should be the maintained for the Morrow V-6 and Morrow V-7 Sandstone Formations. Said units should consist of the E1/2 and the W1/2 or the N1/2 and the S1/2 of a governmental quarter section, with the permitted well to be located no closer than 600 feet from the boundaries of the unit and no closer than 1200 feet from any other producing or producible from the Morrow Sandstone Formation. In addition, the Director should be allowed to grant exceptions to well locations provided that mineral owners or leasehold owners toward whom a well is proposed to be moved, file waivers or consents to the proposed location.

7. That the request for approval to drill a third well in the SW1/4 of Section 1, Township 18 South, Range 42 West, 6th P.M., no closer than 600 feet to the boundaries of the unit upon which it is located and no closer than 1200 feet from any other producing well into the same formation, with the Morrow V-7 Sandstone as the target formation is not required with the granting of an order designating two separate sources of supply in the Morrow V-6 and Mor row V-7 Sandstone Formations.

8. This matter was heard by the Hearing Officers who recommend approval based upon the geological and engineering testimony presented at the administrative hearing showing that the Morrow V-6 and Morrow V-7 Sandstone Formations are separate sources of supply, and that due to the nature of the Morrow channel sand, exceptions to the permitted location should be allowed to be granted by the Director.

9. No objections to the application were received and an order of the Commission should be entered designating the Morrow V-6 and Morrow V-7 Sandstone Formations as separate sources of supply, establishing 80-acre drilling and spacing units in accordance with the provisions in Order No. 471-1, and allowing the Director to grant exceptions to well locations provided that mineral owners or leasehold owners toward whom a well is proposed to be moved, file waivers or consents to the proposed location.

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 V-6 and Morrow V-7 Sandstone Formations, described herein below, in addition to other applicable rules and regulations and orders of the Commission, if any, heretofore adopted and not in conflict herein:

Rule 1. That evidence presented at the hearing indicates that the Morrow V-6 and Morrow V-7 Sandstone Formations constitute common sources of supply of oil, gas and associated hydrocarbons underlying the following described lands in Kiowa County, Colorado, to-wit:

Township 18 South, Range 42 West, 6th P.M. Section 1: All Section 2: All

Rule 2. That the stratigraphic equivalent for the Morrow V-6 Sandstone is found in the Dual Induction log for the Pierson No. 1-1 Well located in the NE1/4 SW1/4 of Section 1, Township 18 South, Range 42 West, 6th P.M., and the stratigraphic equivalent for the Morrow V-7 Sandstone is found in the Dual Induction log for the Schneider No. 34-1 Well located in the SW1/4 SE1/4 of Section 1, Township 18 South, Range 42 West, 6th P.M. and defined as follows:

Morrow V-6 Sandstone 5130 feet to 5162 feet Morrow V-7 Sandstone 5148 feet to 5168 feet

Rule 3. 80-acre drilling and spacing units shall be established for production from the Morrow V-6 and Morrow V-7 Sandstone Formation in said Sections 1 and 2. Said units shall consist of the E1/2 and the W1/2 or the N1/2 and the S1/2 of a governmental quarter section, with the permitted well to be located no closer than 600 feet from the boundaries of the unit and no closer than 1200 feet from any other producing or producible from the Morrow Sandston e Formation. In addition, the Director shall be allowed to grant exceptions to well locations provided that mineral owners or leasehold owners toward whom a well is proposed to be moved, file waivers or consents to the proposed location.

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 day of July, 1993, as of July 19, 1993.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary Dated at Suite 380 1580 Logan Street Denver, Colorado 80203 July 30, 1993 ??

(471#4)