REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on July 17, 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 application of Texaco Exploration and Production, Inc., for an order pooling all interests in the 640-acre exploratory unit consisting of the Section 15, Township 34 North, Range 11 West, N.M.P.M., for the development and operation of the P aradox Formation.

FINDINGS

The Commission finds as follows:

1. That Texaco Exploration and Production, Inc., as applicant herein, is an interested party in the subject matter of the above-referenced hearing.

2. That due notice of the time, place and purpose of the hearing has been given in all respects as required by law.

3. That 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. Section 15 was established as a 640-acre exploratory unit for the Paradox Formation by the Commission in Order No. 498-1 issued July 17, 1995.

5. Efforts have been made to obtain the voluntary pooling of all interests. Three parties within the exploratory unit have not signed leases or agreed to participate. The Southern Ute Indian Tribe owns the SW1/4 SE1/4 of Section 15, Township 34 North, Range 11 West, N.M.P.M. and should not be included in a pooling order

6. Based on the facts stated in the application, and having been heard by the Hearing Officer on June 15, 1995, and recommended for approval, and having been continued from the June 19, 1995 hearing, pending notification to all interested parties of a correction on the original application, the Commission should enter an order pooling all interests in the 640-acre exploratory unit herein described except those interests held by the Southern Ute Indian T ribe, in order to insure proper and efficient development of the gas and associated hydrocarbons from the Paradox Formation underlying said unit.

7. That an order of the Commission pooling all interests in said exploratory unit is necessary in order to afford each owner of interest in said exploratory unit the opportunity to recover and receive their just and equitable share of the oil and/or gas from the common source of supply underlying said exploratory unit.

8. That Texaco Exploration and Production Inc., should be designated as the operator for the Long Hollow No. 1 Well to be drilled in the NE1/4 NW1/4 of Section 15, Township 34 North, Range 11 West, N.M.P.M. for production from the Paradox Formation.

ORDER

NOW, THEREFORE IT IS ORDERED, that, 1. pursuant to the provisions of C.R.S. 34-60-116, as amended, of the Oil and Gas Conservation Act of the State of Colorado, all interests in the exploratory unit consisting of Section 15, Township 34 North, Range 11 West, N.M.P.M., La Plata County, Colorado, except those interests held by the Southern Ute Indian Tribe, are hereby pooled for the development of gas and associated hydrocarbons from the Paradox Formation . and that Texaco Exploration and Production Inc., shall be designated as the operator for the Long Hollow No. 1 Well to be drilled in the NE1/4 NW1/4 of Section 15, Township 34 North, Range 11 West, N.M.P.M. for production from the Paradox Formation.

IT IS FURTHER ORDERED, that, 2. The production obtained from said exploratory unit shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within said exploratory unit; each owner of an interest in said exploratory unit shall be entitled to receive his share of the production of the well located on said exploratory unit applicable to his interest in sai d exploratory unit.

3. The owner of the unleased tract should be afforded the opportunity to elect whether to participate in the drilling and operation of said well, and pay a proportionate share of the actual costs thereof, which proportionate share shall be determined by dividing the number of acres in each unleased tract to the total number of acres within said exploratory unit.

4. Within thirty (30) days from the date of receipt of said A.F.E. by the owner of said tract, such owner shall indicate whether he consents to the cost of the drilling of the well and agrees to participate in such costs. Such election shall be made in writing either by executing the AFE or similar document. In the event a written election to participate is not made by said owner within such time period, said owner shall be deemed to have elected not to participate and shall therefore be deemed to be non-consenting as to the well and be subject to the penalties as provided for by 34-60-116 (7).

5. Any non-consenting unleased mineral owner within the exploratory unit shall be treated as the owner of the landowner's royalty to the extent of 12.5% of his or her record title interest, whatever that interest may be, until such time as the consenting owner recovers, only out of the non-consenting owner's proportionate 87.5% share of production, the costs specified in C.R.S. 34-60-116 (7)(b), as amended. After recovery of such costs, the non-consent ing mineral owner shall then own his proportionate 8/8ths share of the well, surface facilities and production, and then be liable for his proportionate share of further costs incurred in connection with the well as if he had originally agreed to the drilling.

6. The operator of any well drilled on the above described unit shall furnish all non-consenting owners with a monthly statement of all costs incurred, together with the quantity of oil and gas produced, and the amount of proceeds realized from the sale of production during the preceding month.

7. That Texaco Exploration and Production Inc., shall be designated as the operator for the Long Hollow No. 1 Well to be drilled in the NE1/4 NW1/4 of Section 15, Township 34 North, Range 11 West, N.M.P.M. for production from the Paradox Formation.

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 , 1995, as of July 17, 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 August 9, 1995 ??

(498#2)