REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on April 20, 1990 at 9:00 a.m. in the Assembly Room, Weld County Building, 915 West 10th, Greeley, Colorado, after giving Notice of Hearing as required by law, on the verified application of Union Pacific Resources Company to allow the existing well #1X Wailes Farm 11 G-4 to be completed at an exception location for production from the "J" Sand formation.

FINDINGS

The Commission finds as follows:

1. That Union Pacific 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. That the Commission issued Order No. 291-2 which established 80-acre drilling and spacing units for the production of oil and associated hydrocarbons from the "J" Sand with the designated well to be located in the center of quarter quarter section with a tolerance of 200 feet in any direction, and subsequently the Commission amended Order No. 291-2 to allow the option to drill a second well on each 80-acre drilling and spacing unit.

5. Evidence presented at the hearing indicates that the existing well #1X Wailes Farm 11G-4 located 600 feet south of the center of the NW /4 NW /4 of Section 4, Township 2 South, Range 63 West is currently completed in the "D" Sand with no wells completed in the "J" Sand for the unit consisting of the N /2 NW /4 of said Section 4.

6. Geologic and engineering evidence presented at the hearing indicates that the "J" Sand oil reservoir exists in the N /2 NW

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/4 of said Section 4.

7. Further evidence indicates that there are two wells in the 80-acre drilling and spacing unit consisting of the S /2 NW /4 of Section 4, both completed and producing as "J" Sand oil wells being the Lynx Exploration Co. Nos. 5 and 6 Champlin-Wailes.

8. That a completion attempt into the "J" Sand should be allowed in the #1X Wailes 11G-4 well as an exception to the requirements of Cause No. 291 to protect the correlative rights of the operator of the unit consisting of the N /2 NW /4 of said Section 4 and any completion attempts should not include hydraulic fracturing with the displacement of propants into the initiated fractures and with hydraulic fracturing defined as the external application of pressure in excess of that created by a hydrostatic column in the #1X Wailes 11G-4 wellbore sufficient to breakdown or fracture the "J" Sand encountered therein.

9. That the initial production should be reported to the Commission as quickly as possible for the determination of possible production restrictions to be established for the #1X Wailes for the protection of the correlative rights of the owners of the unit consisting of the S /2 NW /4 of said Section 4. - 2 -(291-16)

10. If commercial production is encountered at the location set forth above, the Commission should, at the request of interested persons take such action as will offset any advantage which the person securing the exception may have over other producers by reason of the location of the well as an exception.

ORDER

NOW, THEREFORE, IT IS ORDERED, that Order No. 291-12 be amended to allow a completion attempt into the "J" Sand in the well #1X Wailes 11G-4 located 600 feet south of the center of the NW /4 NW /4 of Section 4, Township 2 South, Range 63 West for the unit consisting of the N /2 NW /4 of said Section 4 as an exception location.

IT IS FURTHER ORDERED, that no hydraulic fracturing as defined in Finding 9 herein above shall be used in the completion attempts in the #1X Wailes 11G-4 and that the initial production shall be reported to the Commission as soon as possible for the determination of possible production restrictions to be placed on the #1X Wailes 11G-4 due to the advantage obtained from the exception location.

IT IS FURTHER ORDERED, that if commercial production is encountered at the location set forth above, the Commission shall, at the request of interested persons, take such action as will offset any advantage which the person securing the exception may have over other producers by reason of the location of the well as an exception.

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.

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith as the parties involved accepted the verbal order of the Commission.

ENTERED this day of , 1990, as of April 20, 1990.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Dennis R. Bicknell, Secretary Dated at Suite 380 1580 Logan Street Denver, Colorado 80203

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0363I

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