REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on November 21, 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 Plains Petroleum Operating Company, for an order to establish an 80-acre drilling and spacing unit for production of oil and associated hydrocarbons from the Niobrara Formation and for an order pooling all interests in an 80-acre drilling and spacing unit in Section 31, Township 4 North, Range 89 West, 6th P.M., for the development and operation of the Niobrara Formation.

FINDINGS

The Commission finds as follows:

1. That Plains Petroleum Operating Company, 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. That evidence presented at the administrative hearing indicates that the Niobrara Formation constitutes a common source of supply underlying Section 31, Township 4 North, Range 89 West, 6th P.M. Due to the poor reservoir quality of the Niobrara Formation oil production is from fractures in the reservoir rock.

5. In order to efficiently recover Niobrara reserves, the applicant wishes to drill a high angle well having a horizontal displacement of 1,800 feet. The well will be situated near a fault and will be drilled directly west to intersect as many fractures as possible. Due to the large horizontal displacement, an 80-acre drilling unit consisting of the NE1/4 SW1/4 and the NW1/4 SE1/4 of Section 31, Township 4 North, Range 89 West, 6th P.M., is requested.

6. Efforts have been made to obtain the voluntary pooling of all interests. One mineral owner has verbally accepted the lease offer and one mineral owner has not accepted the offer.

7. Based on the facts stated in the application, having received no protests, and having been heard by the Hearing Officer who recommends approval of the application, the Commission should approve the request and establish an 80-acre drilling and spacing unit for production of oil and associated hydrocarbons from the Niobrara Formation for the NE1/4 SW1/4 and the NW1/4 SE1/4 of Section 31, Township 4 North, Range 89 West, 6th P.M. Further, the Commissi on should enter an order pooling all interests in the NE1/4 SW1/4 and the NW1/4 SE1/4 of Section 31 in order to ensure proper and efficient development from the Niobrara Formation.

8. That an order of the Commission pooling all interests in said drilling and spacing units is necessary in order to afford each owner of interest in said units 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 unit.

9. That Plains Petroleum Operating Company should be designated as the operator for the proposed high angle well to be drilled from the NW1/4 SE1/4 through the NE1/4 SW1/4 of Section 31, Township 4 North, Range 89 West, 6th P.M., for production of oil and associated hydrocarbons from the Niobrara Formation.

ORDER

NOW, THEREFORE IT IS ORDERED, that an 80-acre drilling and spacing unit is hereby established for production of oil and associated hydrocarbons from the Niobrara Formation for the NE1/4 SW1/4 and the NW1/4 SE1/4 of Section 31, Township 4 North, Range 89 West, 6th P.M.

IT IS FURTHER ORDERED, that, 1. Pursuant to the provisions of 34-60-116, C.R.S., as amended, of the Oil and Gas Conservation Act of the State of Colorado, all interests in the 80-acre drilling and spacing unit consisting of the NE1/4 SW1/4 and the NW1/4 SE1/4 of Section 31, Township 4 North, Range 89 West, 6th P.M., Routt County, Colorado, are hereby pooled for the development of the Niobrara Formation.

IT IS FURTHER ORDERED, that, 2. The production obtained from said drilling and spacing units 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 units; each owner of an interest in said units shall be entitled to receive his share of the production of the well located on said units applicable to his interest in said units.

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 units.

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 A.F.E. 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 n ot 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 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-consenting 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 Plains Petroleum Operating Company shall be designated as the operator for the proposed high angle well to be drilled from the NW1/4 SE1/4 through the NE1/4 SW1/4 of Section 31, Township 4 North, Range 89 West, 6th P.M., for production of oil and associated hydrocarbons from the Niobrara 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 November 21, 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 December 7, 1995 ??

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