REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 8:30 a.m. on October 16, 1996, at 1120 Lincoln Street, Denver, Colorado on the verified amended application of Plains Petroleum Operating Company for an order allowing an additional well to be drilled on each 160-acre drilling and spacing unit on lands in the Beecher Island Field, at the option of the operator, for production of gas from the Niobrara Formation, with the subsequent permitted well to be no closer than 560 feet from the outer boundaries of said 160-acre drilling and spacing unit. The order should allow the Director to grant exceptions to the permitted location without prior notice or hearing upon an adequate showing by the operator that topography makes it unreasonable to drill a second well within the 560 feet setback, but no closer than 380 feet from the boundary of the drilling and spacing unit, and requests for any other exception location may be granted in accordance with Rule 318.

FINDINGS

The Commission find as follows:

1. Plains Petroleum Operating 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. An additional well is required to efficiently and economically recover gas reserves in the drilling and spacing unit.

5. A protest to the application was filed with the Commission by Mountain Petroleum Corporation. This protest was withdrawn prior to the administrative hearing.

6. A letter in support of the protest was filed with the Commission by Heartland Oil and Gas Company. The letter was received by the Commission on October 14, 1996, six days after the October 8th deadline for filing protests and therefore was not a valid protest.

7. On June 19, 1978, the Commission issued Order No. 300-5 which established 160-acre drilling and spacing units consisting of a quarter section for the production of gas from the Niobrara Formation, with the permitted well to be located no closer than 900 feet from the boundaries of the quarter section upon which it is located for the below-listed lands in the Beecher Island Field:

Township 1 South, Range 43 West, 6th P.M. Section 32: S1/2 Section 33: S1/2

Township 2 South, Range 43 West, 6th P.M. Section 2: W1/2 Sections 3 - 5: All Section 6: E1/2 Sections 7 - 10: All Section 11: W1/2 Sections 14 - 23: All Sections 26 - 34: All

Township 2 South, Range 44 West, 6th P.M. Section 12: All Section 24: All Section 13: All Section 25: All Section 14: E1/2 Section 36: All Section 23: E1/2

Township 3 South, Range 43 West, 6th P.M. Section 3: N1/2 Section 7: N1/2 Section 4: All Section 8: N1/2 Section 5: All Section 9: N1/2 Section 6: All

Township 3 South, Range 44 West, 6th P.M. Section 1: All

8. Testimony presented at the administrative hearing indicated that one well would not efficiently and economically drain an area of approximately 160-acres, and that in order to prevent the waste of oil and gas, as defined by law, to protect correlative rights of all parties concerned, and to insure proper and efficient development and promote conservation of the oil and gas resources of the State, an order should be entered allowing an additional well to be drilled on each 160-acre drilling and spacing unit for the production of gas and associated hydrocarbons from the Niobrara Formation for the above-described lands.

9. Based on the facts stated in the verified amended Application, and having been heard by the Hearing Officer who recommends approval, the Commission should enter an order allowing an additional well to be drilled on each 160-acre drilling and spacing unit on lands in the Beecher Island Field, at the option of the operator, for production of gas from the Niobrara Formation, with the subsequent permitted well to be no closer than 560 feet from the outer boundaries of said 160-acre drilling and spacing unit. In addition, the Director should be allowed to grant exceptions to the permitted well location without prior notice or hearing upon an adequate showing by the operator that topography makes it unreasonable to drill a second well within the 560 feet setback, but no closer than 380 feet from the boundary of the drilling and spacing unit, and requests for any other exception location may be granted in accordance with Rule 318.

ORDER

NOW, THEREFORE IT IS ORDERED, that an additional well is hereby allowed to be drilled on each 160-acre drilling and spacing unit on lands in the Beecher Island Field, at the option of the operator for production of gas from the Niobrara Formation, with the subsequent permitted well to be no closer than 560 feet from the outer boundaries of said 160-acre drilling and spacing unit for the below-listed lands:

Township 1 South, Range 43 West, 6th P.M. Section 32: S1/2 Section 33: S1/2

Township 2 South, Range 43 West, 6th P.M. Section 2: W1/2 Sections 3 - 5: All Section 6: E1/2 Sections 7 - 10: All Section 11: W1/2 Sections 14 - 23: All Sections 26 - 34: All

Township 2 South, Range 44 West, 6th P.M. Section 12: All Section 24: All Section 13: All Section 25: All Section 14: E1/2 Section 36: All Section 23: E1/2

Township 3 South, Range 43 West, 6th P.M. Section 3: N1/2 Section 7: N1/2 Section 4: All Section 8: N1/2 Section 5: All Section 9: N1/2 Section 6: All

Township 3 South, Range 44 West, 6th P.M. Section 1: All

IT IS FURTHER ORDERED, that the Director shall be allowed to grant exceptions to the permitted well locations without prior notice or hearing upon an adequate showing by the operator that topography makes it unreasonable to drill a second well within the 560 feet setback, but no closer than 380 feet from the boundary of the drilling and spacing unit, and requests for any other exception location may be granted in accordance with Rule 318.

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 November, 1996, as of October 16, 1996.

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 March 25, 1997 ??

(300#7)