REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on February 19, 1992 at 8:30 a.m., 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 J-W Operating Company, for an order to allow an additional well to be drilled on each 160-acre drilling and spacing unit, at the option of the operator, at a location no closer than 560 feet from the outer boundari es of the 160-acre unit to establish production from the Niobrara Formation underlying each unit in the Waverly Field.

FINDINGS

The Commission finds as follows:

1. J-W 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. On November 21, 1977, the Commission issued Order No. 328-1 which established 640-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Niobrara Formation. Order No. 328-3 established 160-acre drilling and spacing units for the production of gas and associated hydrocarbons 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.

5. On December 19, 1983, the Commission issued Order No. 328-5 which established 160-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Niobrara Formation in the Waverly Field(Outside Area), with the permitted well to be located in the center of either the NW quarter-quarter or the SE quarter-quarter with a tolerance of 100 feet in any direction. An additional well was allowed to be drilled in the undrilled d iagonal offset quarter-quarter section, with a tolerance of 100 feet in any direction.

6. The area is surrounded by fields in which the 160-acre drilling and spacing units have been established and the pattern should be maintained in the surrounding fields. However, geological and engineering evidence presented at the administrative hearing indicates that one (1) well will not in some cases adequately drain an area of 160-acres and that an option to drill an additional well should be allowed in order to economically and efficiently drain the gas and associated hydrocarbons from the Niobrara Formation underlying each 160-acre unit.

7. Based on the facts stated in the verified application, and receiving no protests and having been heard by the Director as Hearing Officer on February 14, 1992 and recommended for approval, the Commission should enter an order authorizing a second well to be drilled, at the option of the operator, on each 160-acre drilling and spacing unit at a location no closer than 560 feet from the outer boundaries of the 160-acre unit for the lands comprising Wav erly Field described herein below.

ORDER

NOW, THEREFORE, IT IS ORDERED, that an additional well may be drilled and completed in the Niobrara Formation on each 160-acre drilling and spacing unit at the option of the operator, with the second permitted well to be located no closer than 560 feet from the outer boundaries of the 160-acre unit for the below-listed lands in Waverly Field, Yuma County, Colorado, to-wit:

Township 3 North, Range 46 West, 6th P.M. Section 6: All

Township 4 North, Range 46 West, 6th P.M. Sections 8, 16-17, 20-21, 29-32: All

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 , 1992, as of February 19, 1992.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary Dated at Suite 380 1580 Logan Street Denver, Colorado 80203 March 12, 1992 ORDERS\328-8

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