IN THE MATTER OF GENERAL RULES AND REGULATIONS WITH RESPECT TO THE CONSERVATION OF OIL AND GAS IN THE STATE OF COLORADO, AND RULES OF PRACTICE AND PROCEDURE PERTAINING THERETO AND IN PARTICULAR WITH REFERENCE TO RULE 323

BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE SHANNON FORMATION IN WELD COUNTY, COLORADO

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CAUSE NOS. 496 and 407

ORDER NOS. 496-1 and 407-69

AMENDED

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on May 20, 1991, in Room 101, State Education Building, 201 East Colfax, Denver, Colorado, after giving Notice of Hearing, as required by law on the verified application of H & C Colton Company to establish 80-acre drilling and spacing units for production from the Shannon formation and further to allow the downhole commingling of production from the Shannon formation with production from the Codell and/or Niobrara formations. In addition, the order is requested to allow the Dos Rios No. 1-33 Well to be recompleted at an exception location.

FINDINGS

The Commission finds as follows:

1. H & C Colton Company 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. 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.

5. That evidence presented at the hearing indicates that the Shannon, Codell and Niobrara formations constitute common sources of supply of oil, gas and associated hydrocarbons underlying the following described lands in Weld County, Colorado to-wit:

Township 4 North, Range 66 West, 6th P.M.
Section	3:	N1/2
Section	4:	NE1/4

Township 5 North, Range 66 West, 6th P.M.
Section	33:	SE1/4
Section	34:	SW1/4

6. Eighty (80) acres [sic] drilling and spacing units should be established for production of oil, gas and associated hydrocarbons from the Shannon formation, with permitted wells located in accordance with Order No. 407-1.

7. Engineering testimony presented indicated that prudent production engineering practices would allow commingled production from the various reservoirs resulting in increased recovery of reserves and no irremediable reservoir damage.

8. Wells previously drilled and completed as productive in the Shannon formation under equities differing from 80-acre drilling and spacing units are not obligated to conform to these units.

9. That the Dos Rios No. 1-33 Well located in the NE1/4 SE1/4 in Section 33, Township 5 North, Range 66 West, 6th P.M., should be allowed to be recompleted to the Shannon formation and further the production from the Shannon formation should be allowed to be commingled with production from the Codell and/or Niobrara formations, for the 80-acre drilling and spacing unit consisting of the E1/2 SE1/4.

10. Based on the facts stated in the verified application, receiving no protests and having been heard by the Director as Hearing Officer on July 12, 1991 and recommended for approval, the Commission should approve the request and establish 80-acre drilling and spacing units for the above-listed lands for the production of oil, gas and associated hydrocarbons from the Shannon formation and further [sic]

11. At the time of administrative hearing the parties agreed to be bound by the verbal order of the Commission in this matter.

ORDER

NOW, THEREFORE, IT IS ORDERED, that,

Rule 1. Eighty (80) acre drilling and spacing units shall be and the same are hereby established for the production of oil, gas and associated hydrocarbons from the Shannon formation, underlying the following described lands in Weld County, Colorado, to-wit:

Township 4 North, Range 66 West, 6th P.M.
Section	3:	N1/2
Section	4:	NE1/4

Township 5 North, Range 66 West, 6th P.M.
Section	33:	SE1/4
Section	34:	SW1/4

Rule 2. Said drilling units shall consist of 80-acres, more or less, and consist of the E1/2 and W1/2 or the N1/2 and S1/2 of a quarter section according to the governmental survey, with the unit to be designated by the operator upon drilling the first well in the 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 operator shall have the option to drill an additional well on the undrilled 40-acre tract in each 80-acre drilling and spacing unit.

Rule 3. Exceptions may be granted by the Director, provided the owners toward whom the well location is proposed to be moved file a waiver or consent in writing. If written waivers or consents are not obtained from all of said owners, then the applicant shall give written notice of the proposed operation by certified mail to said owners.

Rule 4. Wells drilled, or to be drilled in the above-described area, shall be allowed multiple zone completions for both oil or [sic] gas in the Shannon and/or Codell and/or Niobrara formations, and further, authorized for downhole commingling of production.

Rule 5. That the Dos Rios No. 1-33 Well located in the NE1/4 SE1/4 in Section 33, township [sic] 5 North, Range 66 West, 6th P.M., shall be allowed to be recompleted to the Shannon Formation and further the production from the Shannon Formation shall be allowed to be commingled with production from the Codell and/or Niobrara Formations, for the 80-acre drilling and spacing unit consisting of the E1/2 SE1/4.

IT IS FURTHER ORDERED, that with the verbal consent of the interested parties at the time of hearing, this 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 30th July, 1991, as of July 16, 1991.

AMENDED this 11th day of June, 1993.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

Patricia C. Beaver, Secretary

Dated at Suite 380

1580 Logan Street

Denver, Colorado 80203

June 11, 1993