REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on June 15, 1990 at 8:30 a.m., in Room 101, State Education Building, 201 East Colfax, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified application for an order to be issued establishing 40-acre drilling and spacing units for the production of oil and associated hydrocarbons from the Sussex formation underlying certain lands in Weld County, Colorado. This matter was heard by the Commission on May 21, 1990 at which time a continuance was granted. A subsequent amended and expanded application was filed by Wrights Oil & Gas, Inc., and a Notice of Continuation of Hearing was given with the matter to be heard on June 15, 1990

FINDINGS

The Commission finds as follows:

1. That Wrights Oil & Gas, Inc., 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. That prior to the hearing scheduled for May 21, 1990 protests to the application were filed on behalf of Union Pacific Resources Company, Freedom Energy Inc., Prima Oil & Gas Company, The Robert Gerrity Company, and the Colorado Oil & Gas Association.

5. That at the hearing on May 21, 1990 the Commission granted a continuance of the hearing to allow the applicant and protestants an opportunity to address certain additional concerns regarding the potential development of the Sussex formation in other areas with the provision that any order issued at a subsequent hearing would be effective June 15, 1990.

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6. That on May 30, 1990, Wrights Oil & Gas Inc., filed with the Commission a verified amended and expanded application which included additional lands within the area to be considered.

7. That the protests filed on behalf of Union Pacific Resources Company, Freedom Energy Inc., and Prima Oil & Gas Company were subsequently withdrawn prior to the hearing scheduled on June 15, 1990. Freedom Energy Inc., and Prima Oil & Gas Company submitted written comments concerning the matter prior to the hearing.

8. That Elk Exploration, Inc. and HS Resources, Inc., filed a protest to the amended and expanded application prior to the hearing scheduled for June 15, 1990 as did Snyder Oil Corporation.

9. That adequate notice of hearing may not have been given to the additional areas contained within the expanded area and that the expanded area request should be dismissed from the application and only those lands included in the original application filed April 15, 1990 should be considered. Wrights Oil & Gas, Inc., at the time of hearing, verbally withdrew NW/4 Section 31 from the area to be considered.

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10. That the Commission considered the application to be for an order establishing 40-acre drilling and spacing units for the production of oil and or gas from the Sussex formation with the permitted well to be located 660 feet east or west and 660 feet north or south of each existing Codell well and that any permitted well be required to limit the fracture treatment in the Sussex to 300,000 pounds of sand with the bradenhead pressure of all offsetting Codell or Niobrara wells to be monitored during fracture treatment of the Sussex formation and that the production casing be cemented to bring the cement above the top of the Parkman formation for the following lands, to-wit:

Township 4 North, Range 64 West, 6th P.M. Section 31: S/2

Township 4 North, Range 65 West, 6th P.M. Section 25: SE/4 Section 35: SE/4, NW/4

11. That evidence presented indicates that the Sussex formation constitutes a common source of supply of oil and associated hydrocarbons underlying the lands described in Finding 10 herein above.

12. That in order to prevent the waste of oil and gas, as defined by law; to protect the correlative rights of all concerned; to prevent the drilling of unnecessary wells, and insure proper and efficient developments and promote conservation of the oil and gas resources of the State, an order should be made establishing field rules for Sussex formation production and that 40-acre drilling and spacing units should be established with the designated well to be located 660 feet east or west and 660 feet north or south of any existing Codell or Niobrara well.

13. That in prior orders and causes the Commission has adopted certain additional rules to protect the environment and prevent pollution and that the following Rules from Order A-1-3 should be made part of any order entered by the Commission for production from the Sussex formation and should be modified as appropriate: Rule 1. Surface Casing; Rule 3. Production Casing; Rule 4. Completion Requirements and Monitoring; Rule 5. Requirements Before Fracing; Rule 6. Workover; Rule 7. Blowout Preventers; Rule 8. Timing of operations.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the following rules and regulations shall apply hereafter to wells drilled, completed or recompleted in the Sussex Formation underlying certain lands in the Aristocrat Northeast Field, Weld County, Colorado herein described, in addition to any other applicable rules and regulations and orders of the Commission if any, heretofore adopted and not in conflict herewith:

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Rule 1. Forty acre drilling and spacing units shall be and the same are hereby established for the production of oil and associated hydrocarbons from the Sussex formation underlying the following described lands in Weld County, Colorado, to-wit:

Township 4 North, Range 64 West, 6th P.M. Section 31: S/2

Township 4 North, Range 65 West, 6th P.M. Section 25: SE/4 Section 35: SE/4, NW/4

Rule 2. A well shall be located no closer than 600 feet from the outer boundaries of a lease and no closer than 660 feet east or west or 660 feet north or south of an existing Codell or Niobrara well.

Rule 3. A minimum of three hundred (300) feet of surface casing shall be run.

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Rule 4. After thorough circulation of a borehole, cement shall be pumped behind the production casing as provided for in Rule 317 (h), formerly (d), to a height in the annulus sufficient to result in a good bond extending at least 300 feet above the top of the Parkman formation.

Rule 5. Wells drilled to formations below the Sussex formation shall be assumed to have encountered a productive interval and completion procedures shall include protection of the Sussex Sandstone interval with cement as required by Rule 317.f of the Rules and Regulations of the Commission.

Rule 6. Where Codel/Niobrara or J Sand wells exist on a common 40-acre tract or are located within 1200 feet of a proposed Sussex Sandstone formation well, or where a Sussex Sandstone formation well exists and a Codel/Niobrara well or a well to any formation below the Sussex Sandstone formation shall be drilled within a common 40-acre tract or be located within 1200 feet of the existing well, the operators shall collect, interpret, and maintain engineering data during completions, workovers, stimulations and ongoing operations to demonstrate that no interference is being caused to existing or new wells within the field. Any evidence or indications to the contrary shall be promptly reported to the Commission.

Rule 7. Completion Requirements and Monitoring. Upon completion of any well for production and on wells presently completed, the operator shall equip the bradenhead access to the annulus between the production and surface casing with a needle valve and fittings to allow for a pressure reading. Following release of any pressure developed during completion operations and at least 24 hours thereafter, pressure readings shall be taken for a period of 96 hours and the date, time and pressure shall be recorded. In the event that the pressure exceeds a value equal to the setting depth of the surface casing x 0.7 or 250 psi, whichever is less, the operator shall contact the Director within 8 hours for a well located in a residential area and within 24 hours in other areas. A residential area shall be an area that has a platted density of two (2) acres per dwelling or within five hundred (500) feet of a residence or a building of public assembly. In the case of the platted area, the Director shall determine that development is to take place within 3 years. A remedial plan shall be prepared by the operator to determine the source of the gas subject to the approval of the Director. If the gas is found to be coming from a shallow sand or aquifer, then such gas shall be utilized by the operator to prevent waste, and to remove the gas from that shallow zone which will help eliminate potentially hazardous situations.

If no pressure in excess of the setting depth of the surface casing x 0.7 or in excess of 250 psi is noticed following the initial

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bleeding of this annulus after completion and for a period of 96 hours, the operator shall observe the pressure every month, and maintain such records in their office for a period of three years. These records shall be submitted to the Commission upon request.

Rule 8. Requirements Before Fracing. Before any operator fracs a well for production in an area as defined in above, he must submit a Form 4, Sundry Notice, indicating his intention to frac, setting forth the interval to be fraced, the method of fracing, a detailed account of the work performed, and the name of the contractor doing the work. The Commission shall be advised of the height of cement properly bonded above the zone to be fraced. Approval of procedures must be obtained prior to undertaking such work, but the Commission shall endeavor to respond within 24 hours of receipt of such notice of intention to frac. Cement placed behind the production casing in accord with Rule 4 shall be allowed to set a minimum of forty-eight (48) hours prior to the undertaking of any frac operation. Verbal approval may be given, but must be confirmed in writing.

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Rule 9. Workover. Prior to undertaking any workover which involves the pulling of tubing from a well located in a residential area as defined in Rule 7 above, the operator or contractor shall contact the Commission by submitting a Sundry Notice, Form 4, and shall indicate thereon the name of the operator and contractor, the location of the well with a detailed description of the work to be done and the date on which the work is to commence. Verbal approval may be given, but must be confirmed in writing.

Rule 10. Blow-out Preventors. Blow-out preventors and kill line or lines shall be installed prior to commencement of any operation to remove tubing from any well completed in the Susses Sandstone, Niobrara, Codell or "J" Sand formations unless waived by the Director upon a showing that no danger from blow-out exists. All blow-out equipment must be in good working order and operated once each 24 hours. Sufficient fluid equipment shall be on location to kill the well immediately in the event of an operational accident

Rule 11. Timing of Operations. The cooperation of the various operators is solicited in timing work events to allow maximum opportunity for observance of work procedures by Commission personnel. The operator and/or contractor shall notify the Commission of fracing, cementing and workovers in the defined area. The Commission and the County Officer of Emergency Management shall be notified immediately of any leaking or other incidents that may affect the safety of the citizens and property in the area.

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 ,

1990, as of June 15, 1990.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Dennis R. Bicknell, Secretary

Dated at Suite 380 1580 Logan Street

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Denver, Colorado 80203

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