REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on June 19, 1995 at 8:30 a.m. in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified amended application of North American Resources Company for an order amending Order Nos. 232-112, 407-153 and 493-32 to allow the Luhman No. 1 Well located in the SW1/4 SE1/4 of Section 4, Township 2 North, Range 67 West, and the Lu hman No. 33-4 Well located in the NW1/4 SE1/4 of said Section 4, both drilled to the "J" Sand Formation to be simultaneously produced from the "J" Sand Formation in the SE1/4 of said Section 4, for a period of testing not to exceed eighteen (18) months, for the purpose of gathering reservoir data to more accurately determine the area being drained by these wells. Further, the Applicant requests approval of the proposed allocation method for all wells in the SE1/4 in which "J" Sand Formation production may be commingled with production from the Codell, Niobrara and Sussex Formations, during the period of testing.

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 4, Township 2 North , Range 67 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 for certain lands and to allow the downhole commingling of production from the Codell and Niobrara Formations, including Section 4, Township 2 North, Range 67 West, 6th P.M.

6. 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 4, Township 2 North, Range 67 West, 6t h P.M.

7. Testimony presented at the administrative hearing indicated that previously issued Commission Order Nos. 232-112, 407-153 and 493-32 allowed the drilling of the Luhman No. 1 Well and the Luhman No. 33-4 Well at exception locations and approved an allocation method. Additional testimony indicated the Luhman No. 1 Well was recompleted to the Niobrara and Codell Formations after the Luhman No. 33-4 Well was drilled to the "J" Sand Formation.

8. The applicant seeks approval to simultaneously produce the Luhman No. 1 Well and the Luhman No. 33-4 Well to help determine reservoir performance. Both wells would be produced for a period not to exceed eighteen (18) months.

9. Having been heard by the Hearing Officers and recommended for approval based on testimony that in order to effectively determine reservoir performance, the Luhman No. 1 Well and the Luhman No. 33-4 well should be produced simultaneously for a period not to exceed eighteen (18) months. The amended allocation method should also be approved.

O R D E R

NOW, THEREFORE, IT IS ORDERED, that in order to effectively determine reservoir performance, the Luhman No. 1 Well and the Luhman No. 33-4 Well are hereby approved to be produced simultaneously for a period not to exceed eighteen (18) months.

IT IS FURTHER ORDERED, that after a period of testing not to exceed eighteen (18) months, at the option of the applicant, either the Luhman No. 1 Well or the Luhman No. 33-4 Well shall be recompleted for production from only the Codell and Niobrara Formation.

IT IS FURTHER ORDERED, that the amended method is hereby approved for the allocation of production from the "J" Sand, 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 , 1995, as of June 19, 1995.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary

Dated at Suite 801 1120 Lincoln Street Denver, Colorado 80203 July 12, 1995 ??

(232#151)