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 b;y law, on the verified application of Mitchell Energy Corporation for an order establishing 320-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Dakota Formation underlying certain lands in Rio Blanco Coun ty, Colorado.

FINDINGS

The Commission finds as follows:

1. Mitchell Energy Corporation, 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 in said Notice, and of the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order.

4. Based upon the facts stated in the verified application, and receiving no objections, and having been heard by the Director as Hearing Officer who recommends approval, and exhibits submitted, the Commission should enter an order establishing 320-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Dakota Formation underlying the herein described lands in Rio Blanco County, Colorado.

5. In order to prevent the waste of oil and gas, as defined by law, to protect correlative rights of all parties concerned; to prevent the drilling of unnecessary wells, and to insure proper and efficient development and promote conservation of the oil and gas resources of the State, an order should be made establishing 320-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Dakota formation herein. Each unit should consist of 320 acres, more or less, with the units to be designated by the operator of the first well to be drilled in any governmental section. Such units should consist of the E1/2 and W1/2 or N1/2 and S1/2 of any section except Designated Units #1 and #2 which should consist of the following:

Designated Unit #1 - Section 3, Township 3 South, Range 104 West Lots 1, 2, 3 and 4

Designated Unit #2 - Section 10, Township 3 South, Range 104 West Lots 1, 2, 3 and 4

The permitted well should be located no closer than 990 feet for the outer boundary of said unit and wells presently producing and producible, or permitted within the proposed area should be designated the permitted well for the drilling and spacing unit upon which such well is located and that all operators of such wells should notify the Commission of the unit designation within thirty (30) days of the entry of this order. The Director should be able t o grant topographic variances without notice or hearing.

6. All available and engineering data concerning said Dakota Formation indicate that one well will efficiently and economically drain an area of approximately 320-acres, and that the drilling unit of the size and shape hereinabove described is not smaller than the maximum area that can be efficiently and economically drained by one well producing from said Dakota Formation.

O R D E R

NOW THEREFORE IT IS ORDERED, that the following rules and regulations shall apply hereafter to wells drilled, completed, or recompleted in the Dakota Formation in the Park 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. Three hundred twenty (320) acre drilling and spacing units shall be and the same are hereby established for the production of gas and associated hydrocarbons from the Dakota Formation underlying the following described lands in Rio Blanco County, Colorado, to-wit:

Township 3 South, Range 103 West, 6th P.M. Section 6: Lots 10, 11, 12, 13, 14, SE1/4 NW1/4, E1/2 SW1/2 (being the approximate W1/2) Section 7: Lots 5, 6, 7, 8, E1/2 W1/2 (being the approximate W1/2) Section 18: Lots 5, 6, 7, 8, E1/2 W1/2 (being the approximate W1/2)

Township 3 South, Range 104 West, 6th P.M. Section 1: Lots 1, 2, 3, 4, S1/2 N1/2, S1/2 (All) Section 2: Lots 1, 2, 3, 4, S1/2 N1/2, S1/2 (All) Section 3: Lots 1, 2, 3, 4, (All) Section 10: Lots 1, 2, 3, 4, (All) Section 11: All Section 12: All Section 13: All Section 14: E1/2

Section 3 and 10 of Township 3 South, Range 104 West, 6th P.M. are immediately adjacent to and abut the state line between Colorado and Utah.

Rule 2. Each unit shall consist of 320-acres, more or less, with the units to be designated by the operator of the first well to be drilled in any governmental section except the following two units:

Designated Unit #1 - Section 3, Township 3 South, Range 104 West Lots 1, 2, 3 and 4 Designated Unit #2 - Section 10, Township 3 South, Range 104 West Lots 1, 2, 3 and 4

Such other units shall consist of the E1/2 and W1/2 or N1/2 and S1/2 of any section with the permitted well located no closer than 990 feet from the outer boundary of said unit. Wells presently producing or producible, or permitted within the proposed area shall be designated the permitted well for the unit upon which they are located, and operators of such wells shall notify the Commission of the unit designation within thirty days of the entry of this order. The Director shall be able to grant topographic variances without notice or hearing.

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 rights, after notice and hearing, to alter, amend, or repeal any and/or all of the above orders.

ENTERED this 23rd day of February 1989, as of February 21, 1989.

AMENDED this day of , 1993, as of February 21, 1989.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Dennis R. Bicknell, Secretary ??