REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on November 21, 1994 at 8:30 a.m., in Room 318, 1313 Sherman Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified application of Valley Operating, Inc., for an order to allow an additional well to be drilled on each 320-acre drilling and spacing unit for the lands described in Order No. 338-1, with the permitted location for any additional well to be located no c loser than 600 feet from the outer boundaries of the 320-acre drilling and spacing unit and 1200 feet from any other producing well, for production of gas and associated hydrocarbons from the Lewis Sand Formation.

FINDINGS

The Commission finds as follows:

1. Valley Operating, Inc., 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 September 18, 1978, the Commission issued Order No. 338-1 which established 320-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Lewis Sand Formation underlying the below-described lands in the Black Mountain Field, with the units to consist of the E1/2 and the W1/2 of each section according to the governmental survey, with the permitted well to be located no closer than 600 feet from the boundaries of the drilling and spacing unit upon which it is located, and no closer than 1200 feet from another producing well.

Township 10 North, Range 90 West, 6th P.M. Section 21: All Section 28: All Section 22: All Section 33: All Section 27: All Section 34: All

5. Testimony presented at the administrative hearing indicated that one well would not efficiently and economically drain an area of approximately 320-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 320-acre drilling and spacing unit, with the permitted well to be located no closer than 600 feet from the outer boundaries of the unit and 1200 feet from any other producing well, for the production of gas and associated hydrocarbons from the Lewis Sand Formation for the lands described in Finding 4.

6. Based upon the facts stated in the verified application, having received no protests to the 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 320-acre drilling and spacing unit for the production of gas and associated hydrocarbons from the Lewis Sand Formation underlying the herein-described lands in Moffat County, Colorado.

ORDER

NOW, THEREFORE, IT IS ORDERED, that an additional well is hereby allowed to be drilled on each 320-acre drilling and spacing unit, with the permitted well to be located no closer than 600 feet from the outer boundaries of the unit and 1200 feet from any other producing well, for the production of gas and associated hydrocarbons from the Lewis Sand Formation underlying the below-described lands in the Black Mountain Field in Moffat County, Colorado:

Township 10 North, Range 90 West, 6th P.M. Section 21: All Section 28: All Section 22: All Section 33: All Section 27: All Section 34: 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 , 1994, as of November 21, 1994.

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 29, 1994 ??

(318#5)