IN THE MATTER OF GENERAL RULES AND REGULATIONS WITH RESPECT TO THE CONSERVATION OF OIL AND GAS IN THE STATE OF COLORADO, AND RULES OF PRACTICE AND PROCEDURE PERTAINING THERETO AND IN PARTICULAR WITH REFERENCE TO RULE 323

BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE WATTENBERG GAS SPACED AREA, THE CODELL-NIOBRARA SPACED AREA, AND THE WATTENBERG FIELD, WELD COUNTY, COLORADO

)

CAUSE NOS. 232, 407, AND 493

ORDER NOS. 232-98, 407-137,

and 493-28

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 8:30 a.m. on May 17, 1993 in the 2nd Floor Auditorium, Colorado Department of Transportation, 4201 East Arkansas Avenue, Denver, Colorado on the verified application of North American Resources Company, for an order to amend Cause Nos. 232, 407 and 493 to allow the Aristocrat Angus No. 22-8 well to be completed in the "J" Sand Formation at an exception location 2130 feet FNL and 2130 feet FWL in the SE1/4 NW1/4 of Section 8, Township 3 North, Range 65 West, 6th P.M. for the 320-acre drilling and spacing unit consisting of the W1/2 of said Section 8, and further that the downhole commingling of production from the "J" Sand Formation with production from the Codell-Niobrara Formations and the Sussex Formation be allowed, and further that a proposed method of allocation be authorized.

FINDINGS

The Commission finds as follows:

1. North American Resources Company (NARCO), 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. In Cause No. 232, the Commission established 320-acre drilling and spacing units for the production of gas from the "J" Sand Formation in the Wattenberg Field with one well allowed for each unit to be located in the NE1/4 and SW1/4 and no closer than 990 feet to the boundaries of the quarter section. On August 21, 1979, the Commission issued Order No. 232-20 which allowed a second well to be drilled on each 320-acre unit, including Section 8, Township 3 North, Range 65 West, 6th P.M.

5. In Order No. 407-1, the Commission established 80-acre drilling and spacing units for the production of oil and/or gas and associated hydrocarbons from the Codell Formation. Wells shall be located in the center of the 40-acre tract or quarter-quarter section with a tolerance of 200 feet in any direction. Subsequent orders of the Commission amended Order No. 407-1 to include production from the Niobrara Formation in certain lands and to allow the downhole commingling of production from the Codell and Niobrara Formations, including Section 8, Township 3 North, Range 65 West, 6th P.M.

6. In Order Nos. 407-67 and 493-2, the Commission established 80-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Sussex Formation, with wells to be located in the center of the 40-acre tract or quarter-quarter section with a tolerance of 200 feet in any direction, and further allowed the downhole commingling of production from the Sussex Formation with production from the Codell and Niobrara Formations, including Section 8, Township 3 North, Range 65 West, 6th P.M.

7. In Order Nos. 407-66 and 232-47, the Commission, among other things, allowed the downhole commingling of production from the "J" Sand Formation with production from the Codell and Niobrara Formations, including Section 8, Township 3 North, Range 65 West, 6th P.M.

8. The Commission approved an Application for Permit to Drill filed by NARCO for the Aristocrat Angus No. 22-8 Well at a location 2130 feet FNL and 2130 feet FWL in the SE1/4 NW1/4 of said Section 8 for the 80-acre drilling and spacing unit consisting of the E1/2 NW1/4 of said Section 8 for production to be obtained from the Codell and Niobrara Formations and the Sussex Formation underlying said unit.

9. On May 14, 1993, the applicant advised the Commission in writing that the location of the Aristocrat Angus No. 22-8 Well was moved fifty feet in both directions prior to spudding the well so that the correct location is 2180 feet FNL and 2180 FWL in the SE1/4 NW1/4 of Section 8, Township 3 North, Range 65 West, 6th P.M.

10. The W1/2 of said Section 8 has been designated as a 320-acre drilling and spacing unit for the "J" Sand Formation by virtue of the "J" Sand Formation Aristocrat Angus Ranch No. 1 Well located in the SW1/4 of Section 8, operated by Vessels Oil and Gas Co; [sic] no well had been drilled and completed in the "J" Sand Formation in the NW1/4 of Section 8.

11. Subsequent to the approval of the Application for Permit to Drill and during the time of drilling of the Aristocrat Angus No. 22-8 well, NARCO obtained 100 percent of the working interests to the "J" Sand Formation underlying the NW ¼ [sic] of said Section 8, and drilled and cased the well through the "J" Sand Formation and advised the Commission of these facts.

12. Based on the facts stated in the verified application and having been heard by the Hearing Officer who recommended approval of the application, and having received no protests, the Commission should approve the request and amend the orders in Cause No. 232 to allow the Aristocrat Angus No. 22-8 Well, located 2180 feet FNL and 2180 feet FWL in the NW1/4, Section 8, Township 3 North, Range 65 West, 6th P.M. to be completed at an exception location for production from the "J" Sand Formation, and further should allow the dual completion and downhole commingling with the production obtained from the Codell and Niobrara Formations and the Sussex Formation, and accept the proposed allocation method described in the NARCO letter of April 14, 1993 sent to all interests in the above-described 320-acre and 80-acre drilling and spacing units.

ORDER

NOW, THEREFORE, IT IS ORDERED that the orders in Cause No. 232 are hereby amended to allow the Aristocrat Angus No. 22-8 Well to be completed in the "J" Sand Formation at an exception location 2180 feet FNL and 2180 feet FWL NW1/4 Section 8, Township 3 North, Range 65 West, 6th P.M., Weld County, Colorado for the 320-acre drilling and spacing unit consisting of the W1/2 of said Section 8.

IT IS FURTHER ORDERED that the downhole commingling of the production obtained from the "J" Sand Formation with that obtained from the Codell and Niobrara Formations and the Sussex Formation is authorized.

IT IS FURTHER ORDERED that the allocation method described in the NARCO letter of April 14, 1993 to all interests in the 320-acre "J" Sand Formation drilling and spacing unit consisting of the W1/2 of said Section 8 and the 80-acre Codell-Niobrara and Sussex Formation drilling and spacing unit consisting of the E1/2 NW1/4 of said Section 8 is the allocation method accepted by the Commission for the commingled production that may be obtained.

IT IS FURTHER ORDERED that no additional Application for Permit to Drill be submitted, but that all actual information concerning the completion of the Aristocrat Angus No. 22-8 Well shall be reported to the Commission by means of the initial Completion Report, Form 5, and initial Certificate of Clearance, Form 10, accompanied by a copy of this order.

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 20th day of May, 1993, as of May 17, 1993.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

Patricia C. Beaver, Secretary

Dated at Suite 380

1580 Logan Street

Denver, Colorado 80203

May 20, 1993