REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on May 17, 1993 at 8:30 a.m. in the 2nd Floor Auditorium, Colorado Department of Transportation, 4201 East Arkansas Avenue, Denver, Colorado, after giving Notice of Hearing, as required by law, on the verified application of CFG Energy, Inc. to rescind the involuntary pooling provisions established for the NE1/4 SW1/4 of Section 21, Township 5 North, Range 64 West, 6th P.M. by Commission Order No. 407-116, and further to segregate the 80-acre drilling and spacing unit consisting of the S1/2 SW1/4 of said Section 21 into two 40-acre units for production from the Codell and Niobrara Formations underlying the proposed units, and further to establish four 40-acre drilling and spacing units in the SW1/4 of said Section 21 for production from the Sussex Formation underlying said units and to allow the dual completion and downhole commingling of production f rom the Codell, Niobrara and Sussex Formations.

FINDINGS

The Commission finds as follows:

1. CFG Energy, Inc., 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. On December 19, 1983, the Commission authorized Order No. 407-1 to be issued which established 80-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Codell Formation. The units consist of the E1/2 and W1/2 or the N1/2 and S1/2 of each governmental quarter section. The permitted well shall be located in the center of either 40-acre tract within the unit, with a tolerance of 200 feet in any direction and the option to drill an additional well in the undrilled 40-acre tract. Subsequent Order No. 407-10 included the Niobrara Formation and allowed downhole commingling of production from the Codell and Niobrara Formations. The SW1/4 of Section 21, Township 5 North, Range 64 West, 6th P.M., Weld County, Colorado lies within the area spaced by these orders.

5. In Order No. 493-1, the Commission established 80-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Sussex Formation. Wells shall be located as ordered in Cause No. 407 described in Finding No. 4 herein above with the downhole commingling of production from the Sussex, Codell and Niobrara Formations allowed. Section 21, Township 5 North, Range 64 West, 6th P.M. was not included in this order.

6. Based on the facts stated in the verified application, receiving no protests, and having been heard by the Hearing Officer on May 13, 1993 and recommended for approval, the Commission should enter an order recognizing an 80-acre drilling and spacing unit consisting of the S1/2 SW1/4 of said Section 21 and further segregating the 80-acre unit into two 40-acre units consisting of the SW1/4 SW1/4 and the SE1/4 SW1/4 of said Section 21 for the production from the Codell and Niobrara Formation underlying said units.

7. That the Sussex Formation is a common source of supply of oil, gas and associated hydrocarbons underlying the SW1/4 of said Section 21.

8. 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 of 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, gas, and associated hydrocarbons from the Sussex Formation, unde rlying the lands defined herein; that said unit should be 40-acres, more or less, and consisting of a quarter-quarter section according to the governmental survey thereof; and that the permitted well for each such drilling unit should be located in accordance with orders in Cause Nos. 407 and 493.

9. That the involuntary pooling provisions established by Commission Order No. 407-116 for the 40-acre drilling and spacing unit consisting of the NE1/4 SW1/4 of said Section 21 for the development of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations underlying said unit have not been applied, are not necessary as all interests are under lease, and should be rescinded.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the S1/2 SW1/4 of Section 21, Township 5 North, Range 64 West, 6th P.M. is hereby recognized as an 80-acre drilling and spacing unit in conformance with the orders in Cause No. 407, and further that the 80-acre unit is segregated into two 40-acre drilling and spacing units consisting of the SW1/4 SW1/4 and the SE1/4 SW1/4 of said Section 21 for the commingled production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations underlying these lands.

IT IS FURTHER ORDERED, that 40-acre drilling and spacing units shall be and the same are hereby established for the production of oil, gas and associated hydrocarbons from the Sussex Formation underlying the SW1/4 of Section 21, Township 5 North, Range 64 West, 6th P.M., Weld County, Colorado, and that such units shall consist of a governmental quarter-quarter section with the well to be located in accordance with the provisions of orders in Cause Nos. 4 07 and 493, and that the dual completion and downhole commingling of production from the Codell, Niobrara, and Sussex Formations is allowed.

IT IS FURTHER ORDERED, that the involuntary pooling provisions established by Commission Order No. 407-116 for the NE1/4 SW1/4 of said Section 21 for the development of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations underlying said unit are hereby rescinded.

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 , 1993 as of May 17, 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 May 21, 1993

??

(407#138)