REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on April 16, 1984 at 9:00 A.M., in Room 110, State Centennial Building, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of Fuel Resources Development Co. (FUELCO), for an order amending said Order No. 374-1 and establish 40-acre drilling and spacing units for the production of oil and associated hydrocarbons from the Castlegate (Mancos "A") formation underlying certain lands in the Texas Mountain Field, Rio Blanco, Colorado, and further to have the option to drill and produce from said formation at 20-acre intervals with no more than six (6) wells total to be drilled and produced within a 160-acre tract located within the lands described herein.

FINDINGS

The Commission finds as follows:

1. Fuel Resources Development Co. (FUELCO), 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. Geological evidence presented at the hearing indicates that due to faulting in the Castlegate (Mancos "A") formation, a common source of supply of oil and associated hydrocarbons exists separately from the gas zone as spaced by Order No. 374-1. Said common source of supply of oil and associated hydrocarbons underlies the following described lands in the Texas Mountain Field, Rio Blanco County, Colorado, to-wit:

Township 3 South, Range 102 West, 6th P.M. Section 16: SE/4 Section 20: S/2 Section 21: All

5. In order to prevent waste of oil and gas, as defined by law, to protect the 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, Order No. 374-1 should be amended and an order should be made establishing 40-acre drilling and spacing units for the production of oil and associated hydrocarbons from the Castlegate (Mancos "A") formation down to the top of the Emery (Mancos "B") formation, a common source of supply underlying the lands defined herein. That said units should be 40-acres, more or less, and consist of a quarter-quarter section according to the governmental survey. However, depending on specific geological data at a drillsite, applicant should have the option to drill at 20-acre intervals, but in no event to drill more than six (6) wells per 160-acre tract producing oil and associated hydrocarbons from said Castlegate formation. The permitted well location should be in accordance with Rule 318; however, due to topography and faulting in the area, administrative approval should be granted where good cause can be shown to drill at locations less than 600 feet from lease lines and less than 1200 feet from another producing or producible oil well from said Castlegate formation.

6. A well producing gas in excess of 25 Mcf/day from said Castlegate formation should be considered a gas well and should be shut-in and not be allowed to produce unless the well is in compliance with the provisions of Order No. 374-1.

ORDER

NOW, THEREFORE, IT IS ORDERED, that Order No. 372-1 is hereby amended and the following rules and regulations shall apply hereafter to a well drilled, completed., or recompleted in the Castlegate (Mancos "A") formation to the top of the Emery (Mancos "B") formation underlying certain lands in the Texas Mountain Field, herein described, in addition to other applicable rules and regulations and orders of the Commission, if any, heretofore adopted and not in conflict herewith.

Rule 1. Forty (40 acre drilling and spacing units shall be and the same are hereby established for the production of oil and associated hydrocarbons from said Castlegate (Mancos "A") formation underlying the following describe lands in the Texas Mountain Field, Rio Blanco County, Colorado:

Township 3 South, Range 102 West, 6th P.M. Section 16: SE/4 Section 20: S/2 Section 21: All

Rule 2. Said drilling unit shall consist of 40-acres and consist of a quarter-quarter section according to the governmental survey with the permitted well located according to the general Rule 318; however, the Director may, with good cause shown, approve locations less than 600 feet from lease lines and less then 1200 feet from another producing or producible oil well from said' Castlegate formation.

Rule 3. The operator shall have the option to drill for the production of oil and associated hydrocarbons from said Castlegate formation on twenty (20) acre intervals; however, in no event to drill more than six (6) in a 160-acre tract.

Rule 4. A well producing gas in excess of 25 Mcf per day from said Castlegate formation shall be considered a gas well and shall be shut-in and not allowed to produce unless the well is in compliance with the provisions of Order No. 374-1.

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 10th day of May, 1984, as of April 16, 1984.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary

(374-2)