REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on February 21, 1989 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 Mull Drilling Company for an expedited hearing concerning the injection of produced water in the well Funk 27-7 of Medallion Petroleum, Inc. located in the NE/4 NW/4 of Section 27, Township 14 South, Range 42 West, 6th P.M., Cheyenne County, Colorado.

FINDINGS

The Commission finds as follows:

1. Mull Drilling Company, 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 expedited 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 October 1988, Medallion Petroleum, Inc. filed an application for a permit to dispose of salt water into the Morrow formation in the well Funk 27-7 located in the NE/4 NW/4 Section 27, Township 14 South, Range 42 West, 6th P.M., Cheyenne County, Colorado pursuant to Commission Rule 326. The application was approved on January 27, 1989 after all requirements of Rules 326 and 327 were fulfilled.

5. On January 20, ]989 Mull Drilling Company, Inc. filed with the Commission a verified Application and Request for Emergency Order or Delay in Issuance of Permit, and Request for Expedited Hearing on the above matter. On January 23, 1989 the Commission determined an emergency did not exist and the application fora permit filed by Medallion should be approved upon successful completion of the requirements of Rules 326 and 327.

6. Mull Drilling Company, Inc. has drilled a well in the NE/4 NE/4 of Section 28 and a well in the SE/4 NE/4 of Section 28, Township 14 South, Range 42 West, 6th P.M., both of which are capable of production from the Morrow formation.

7. Testimony taken at the time of hearing was insufficient to prove that the volumes of water at the permitted rate for injection at the Funk 27-7 would violate the correlative rights of Mull Drilling Company, Inc., that any enhanced recovery would occur, or that a recycling operation would take place.

8. That certain restrictions should be applied to the Funk 27-7 disposal well which include a maximum disposal volume of 225 barrels of water per day be allowed; that a totalizing meter be installed, and that only produced water from the Medallion wells in Sections 22 and 27 be the source water for disposal purposes, said wells listed herein. Should the disposal volume exceed 225 barrels, the overage should be made up the following month. No makeup of underage should be allowed.

9. That monthly test of the volume of water, oil and gas produced from the individual Medallion wells in Section 22 and 27 listed herein be performed, that the tests may be observed by both Mull Drilling Company, Inc. and the staff of the Oil and Gas Conservation Commission, at their own risk, that notice of such tests should be given at least forty eight (48) hours in advance, and that said tests should commence March 1, 1989.

10. That results of said tests should be furnished on at least a monthly basis to the Commission and presented in a graphical format which should include the ratios of water to oil, water to total volume, and gas to oil ratio as functions of time which should be updated each month for each lease for the following wells:

Township 14 South, Range 42 West

Section 22: Funk 22-10 Section 27 Funk 27-16, 27-8 Arapahoe 27-1, 27-2 27-6

ORDER

NOW, THEREFORE IT IS ORDERED, that a maximum disposal volume of 225 barrels .of water per day be allowed to be injected in the Medallion well Funk 27-7, that a totalizing meter be installed on the well, and that only produced water f:ore the Medallion wells in Section 27 and the well Funk 22-10 in Section 22 be the source water for the disposal well, and that should the disposal volume exceed 225 barrels for any one month, the overage shall be madeup the following month. No makeup of underage shall be allowed.

IT IS FURTHER ORDERED, that monthly tests of the volume of water, oil and gas produced from the individual wells in Section 27 and the Funk 22-10 well located in Section 22 be performed and that notice of such tests be furnished to Mull Drilling Company, Inc. and the Commission who may witness such tests at their own risk, and that such tests be presented as in Finding 10 herein above on a monthly basis.

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, and amend or repeal any and/or all of the above orders.

ENTERED this 3rd day of March 1989, as of February 21, 1989.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Dennis R. Bicknell, Secretary

(449-22)