REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on September 19, 1994 at 8:30 a.m., in Room 318, State Centennial Building, 1313 Sherman Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified application of Rex Monahan for an order pooling all interests in the 40-acre drilling and spacing unit for the development and operation of the Codell and Niobrara Formations for the production of oil and/or gas, and associ ated hydrocarbons underlying said unit, pursuant to Colorado Revised Statutes, 34-60-116, 1984.

FINDINGS

The Commission finds as follows:

1. Rex Monahan 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. A protest to the application was filed by National Hog Farms, Inc.

5. In Order No. 407-159 issued September 19, 1994, the Commission established a 40-acre drilling and spacing unit consisting of the NW1/4 NW1/4 of Section 19, Township 5 North, Range 62 West, 6th P.M. for production from the Codell and Niobrara Formations, authorized the downhole commingling of production from the Codell and Niobrara Formations, and designated the Farr No. 2-19 Well as the permitted well for said 40-acre drilling and spacing unit.

6. Rex Monahan has drilled and completed the Farr No. 2-19 Well located 990 feet FNL and 990 feet FWL in the NW1/4 NW1/4 of Section 19, Township 5 North, Range 62 West, 6th P.M., for production from the Codell and Niobrara Formations, and wishes to perform a workover operation on the Farr No. 2-19 Well to obtain additional production from the Codell and Niobrara Formations.

7. Efforts have been made to obtain the voluntary pooling of all interests in the 40-acre drilling and spacing unit. An A.F.E. for the workover operation on the Farr No. 2-19 Well was furnished to National Hog Farms, Inc., a non-consenting interest who owns 25.5% of the mineral interests, on or around April 11, 1994, and consent has not been given.

8. Based on the facts stated in the verified application and having heard testimony from the applicant and protestant, the Commission should enter an order pooling all interests in the 40-acre drilling and spacing unit herein described, in order to insure proper and efficient development of the oil and gas from the Codell and Niobrara Formations underlying said unit. In addition, the order should require the Director to review the wellsite to determine the adequacy of the surface bond and whether said bond amount should be increased. Further, the order should request Rex Monahan to ensure that subcontractors hired to perform operations at the Farr No. 2-19 Well adhere to the disinfecting process set forth by National Hog Farms, Inc., when accessing the wellsite.

9. An order of the Commission pooling all interests in said drilling unit is necessary in order to afford each owner of interest in each said drilling unit the opportunity to recover and receive his just and equitable share of the oil and/or gas from the common source of supply underlying said drilling unit.

10. Production obtained from said drilling unit should be allocated to each tract therein on the basis of the proportion that the number of acres in each tract bears to the total number of acres within said drilling unit.

11. Rex Monahan should be approved as the operator for the 40-acre drilling and spacing unit consisting of the NW1/4 NW1/4 of Section 19, Township 5 North, Range 62 West, 6th P.M., Weld County, Colorado, for the development and operation of the Codell and Niobrara Formations.

O R D E R

NOW, THEREFORE IT IS ORDERED, that, 1. Pursuant to the provisions of 34-60-116, C.R.S., as amended, of the Oil and Gas Conservation Act of the State of Colorado, all interests in the drilling and spacing unit consisting of the NW/4 NW1/4 of Section 19, Township 5 North, Range 62 West, 6th P.M., Weld County, Colorado, are hereby pooled for the development of gas and associated hydrocarbons from the Codell and Niobrara Formations underlying said unit.

2. The production obtained from said drilling unit shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within said drilling unit; each owner of an interest in said drilling unit shall be entitled to receive his share of the production of the well located on said drilling unit applicable to his interest in said drilling unit.

3. The owner of the leased and unleased tract should be afforded the opportunity to elect whether to participate in the drilling and operation of said well, and pay a proportionate share of the actual costs thereof, which proportionate share shall be determined by dividing the number of acres in each unleased tract to the total number of acres within said drilling unit.

4. Within thirty (30) days from the date of receipt of said AFE by the owner of said tract, such owner shall indicate whether he consents to the cost of the drilling of the well and agrees to participate in such costs. Such election shall be made in writing either by executing the AFE or similar document. In the event a written election to participate is not made by said owner within such time period, said owner shall be deemed to have elected not to participate and shall therefore be deemed to be non-consenting as to the well and be subject to the penalties as provided for by 34-60-116 (7).

5. Any non-consenting unleased mineral owner within the spacing unit shall be treated as the owner of the landowner's royalty to the extent of 12.5% of his or her record title interest, whatever that interest may be, until such time as the consenting owner recovers, only out of the non-consenting owner's proportionate 87.5% share of production, the costs specified in C.R.S. 34-60-116 (7)(b), as amended. After recovery of such costs, the non-consenting mineral owner shall then own his proportionate 8/8ths share of the well, surface facilities and production, and then be liable for his proportionate share of further costs incurred in connection with the well as if he had originally agreed to the drilling.

6. The operator of any well drilled on the above described unit shall furnish all non-consenting owners with a monthly statement of all costs incurred, together with the quantity of oil and gas produced, and the amount of proceeds realized from the sale of production during the preceding month.

7. Rex Monahan is hereby approved as the operator for the 40-acre drilling and spacing unit consisting of the NW1/4 NW1/4 of Section 19, Township 5 North, Range 62 West, 6th P.M., Weld County, Colorado, for the development and operation of the Codell and Niobrara Formations.

IT IS FURTHER ORDERED, that the Director shall review the wellsite to determine if the adequacy of the surface bond and whether said bond should be increased.

IT IS FURTHER ORDERED, that the Commission shall request Rex Monahan to ensure that subcontractors hired to perform operations at the Farr No. 2-19 Well adhere to the disinfecting process set forth by National Hog Farms, Inc., when accessing the wellsite.

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 September 19, 1994.

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 October 12, 1994 ??

(407#160)