REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on October 18, 1993 at 8:30 a.m. in Room 318, State Centennial Building, 1313 Sherman Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of North American Resources Company for an order amending Cause No. 232 to allow two wells to be recompleted for production from the "J" Sand Formation, and to allow the downhole commingling of production from the "J" Sand, Codell, Niobrara, and Sussex Formations for a 320-acre unit.

FINDINGS

The Commission finds as follows:

1. North American Resources Company, 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. In Cause No. 232, the Commission established 320-acre drilling and spacing units for the production of gas from the "J" Sand in the Wattenberg Field with one well allowed for each unit to be located in the NE1/4 and SW1/4 and no closer than 990 feet to the boundaries of the quarter section. On August 21, 1979, the Commission issued Order No. 232-20 which allowed a second well to be drilled on each 320-acre unit, including Section 10, Township 3 Nort h, Range 65 West, 6th P.M.

5. In Order No. 407-1, the Commission established 80-acre drilling and spacing units for the production of oil and/or gas and associated hydrocarbons from the Codell Formation. Wells shall be located in the center of the 40-acre tract or quarter-quarter section with a tolerance of 200 feet in any direction. In Order Nos. 407-10 and 407-13, the Commission amended Order No. 407-1 to include production from the Niobrara Formation in certain lands and to allow the downhole commingling of production from the Codell and Niobrara Formations, including Section 10, Township 3 North, Range 65 West, 6th P.M.

6. In Order No. 493-2, 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 in the center of the 40-acre tract or quarter-quarter section with a tolerance of 200 feet in any direction and the downhole commingling of production from the Sussex, Codell and Niobrara Formations shall be allowed. Section 10, Township 3 North,Range 65 West, 6th P.M. was included in this order.

7. In Order Nos. 407-66 and 232-37, the Commission, among other things, allowed wells drilled, completed, or recompleted in the Codell and/or Niobrara Formations, where the production is commingled or dually completed with the "J" Formation, to be approved administratively, with additional rules established for well locations, unit designations and production allocation methods, for certain lands, including Section 10, Township 3 North, Range 65 West, 6 th P.M.

8. In Order Nos. 493-2 and 407-67, the Commission, among other things, allowed wells, drilled, completed, or recompleted in the Sussex Formation, where the production is commingled or dually completed with the Codell and\or Niobrara Formations, to be approved administratively, with additional rules established for well locations, unit designations and production allocation methods, for certain lands, including Section 10, Township 3 North, Range 65 West , 6th P.M.

9. This matter was heard by the Hearing Officers who recommend approval based upon the testimony presented at the administrative hearing that the existing wellbores should be used for production from the deeper horizon due to proposed and present surface development at the Beebe Draw Farms and Equestrian Center, and the proximity of the Milton Reservoir Lake.

10. No objections to the application were received and an order of the Commission should be entered allowing the Federal No. 12-10 Well in the SW1/4 NW1/4 and the Federal No. 32-10 Well in the SW1/4 NE1/4, both located in Section 10, Township 3 North, Range 65 West, 6th P.M., to be recompleted at the above-described exception location for production from the "J" Sand Formation and to allow the downhole commingling of production from the "J" Sand, Codell , Niobrara, and Sussex Formations.

O R D E R

NOW, THEREFORE, IT IS ORDERED, that an exception is hereby granted to the spacing pattern established by Order No. 232-1, for the Federal No. 12-10 Well in the SW1/4 NW1/4 and the Federal No. 32-10 Well in the SW1/4 NE1/4, both located in Section 10, Township 3 North, Range 65 West, 6th P.M., to be recompleted at the above-described exception location for production from the "J" Sand Formation and for the downhole commingling of production from the "J" S and, Codell, Niobrara, and Sussex Formations.

IT IS FURTHER ORDERED, that should a commercial well be completed at the location set forth above, the Commission shall, upon application of any interested person, take such action as will offset any advantage which the person securing the exception may have over other procedures by reason of the drilling of the well as an exception location.

IT IS FURTHER ORDERED, that the provisions in the above order shall become effective forthwith.

Entered this day of , 1993, as of October 18, 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 November 1, 1993 ??

(232#102)