REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on March 20, 1989, at 8:30 A.M., in Room 101, State Education Building, 201 East Colfax, Denver, Colorado on the verified application of Simla Corporation for an order establishing 160-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the J' Sand formation underlying the NW/4 Section 24, Township 1. South, Range 68 West, 6th P.M. and further that all interest in the NW/4 of said Section 24 be pooled for the operation and development of the unit for the production of oil, gas and associated hydrocarbons from the J' Sand underlying said unit, pursuant to the provisions of 34-60-116 C R S as amended.

FINDINGS

The Commission finds as follows:

1. Simla 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 purposed 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 on behalf of Meracor Mortgage Corporation by its attorney.

5. A well, the Northstar 24-2, located 660 feet FNL an 1330 FWL, Section 24, Township 1. South, Range 68 West, 6th P.M. Adam County, Colorado had been drilled and has been completed in the J' San, formation and is currently shut-in.

6. Evidence presented at the hearing indicated that the J' Sand constitutes a common source of supply of gas and associated hydrocarbons underlying the following described lands in Adams County, Colorado, to-wit:

Township 1 South, Range 68 West, 6th P.M. Section 24: NW/4

7. 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 development and promote conservation of the oil and gas resources of the State, an order should be made establishing 160-acre drilling and spacing units for the production of gas and associated hydrocarbons from the J' Sand underlying the lands defined herein, that said unit should be 160-acres and consist of the NW/4 Section 24, Township 1 South, Range 68 West, 6th P.M. and Well No. 24-2 Northstar, located 660 feet from the north line and 1330 feet from the west line of said section should be considered the permitted well for said unit.

8. All available geological and engineering data concerning said J' Sand indicates that one well will efficiently and economically drain an area of approximately 160-acres, and that the drilling unit of the size and shape hereinafter described is not smaller than the maximum area that can be efficiently and economically drained by one well producing from said J' Sand.

9. In order to insure proper and efficient development of said drilling unit and to promote conservation of the gas resource of the State, an order should be made pooling all interests in the 160-acre unit described herein.

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

11. Production obtained from said 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 unit.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the following rules and regulations shall apply hereafter to wells drilled, completed or recompleted in the J' Sand underlying lands in the Wattenberg area, 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. A one-hundred sixty (160) acre drilling and spacing unit shall De and the same is hereby established for the production of gas and associated hydrocarbons from the J' Sand underlying the following described lands in Adams County, Colorado, to-wit: Township 1 South, Range 68 West, 6th P.M. Section 24: NW/4

Rule 2. The unit shall consist of the NW/4 of said 24 and the permitted well shall be Well No. 24-2 Northstar, 1330 feet from the west line and 660 feet from the north line of said section.

IT IS FURTHER ORDERED, that pursuant to the provisions of 34-60-116, C.R.S. 1973 as amended of the Oil and Gas Conservation Act of the State of Colorado, all interests in the drilling unit consisting of the NW/4 Section 24, Township 2 South, Range 68 West, 6th P.M., Wattenberg area, Adams county, Colorado are hereby pooled for the development of gas and associated hydrocarbons from the J' Sand underlying said unit.

IT IS FURTHER ORDERED, that the production obtained from said drilling unit shall be allocated to each tract therein on the basis of the proportion that the number of acres in such tract bears to the total number of acres within said drilling unit, and each owner of interest in said tracts 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. The six tracts comprising the NW/4 of Section 24 were presented on a surface map prepared by Freese Engineering, Job 1988-74, October, 1988 as part of Exhibit "G" at the time of hearing. The tract factors for the six tracts are listed below:

Township 1 South, Range 68 West, 6th P.M. Section 25; NW/4 containing 163.06 acres, more or less.

Tract Acres Factor Tract 1, E/2 NW/4 except portion Tract 6 containing more or less 80.56A 0.4941 Tract 2, E/2 NW/4 NW/4 containing, more or less 18.94A 0.1162 Tract 3, Parcel in W/2 NW/4 containing, more or less 47.23A 0.2896 Tract 4, Strip in W/2 NW/4 containing, more or less 9.24A 0.0567 Tract 5, Parcel in NW/4 NW/4 containing, more or less 1.98A 0.0121 Tract 6, Strip in NW/4 containing, more or less 5.11A 0.0313 Totals: 163.06A 1.0000

IT IS FURTHER ORDERED, that the provisions contained in the above order and rules and regulations shall become effective forthwith.

ENTERED this 12th day of April day of 1989, as of March 20, 1989.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Dennis R. Bicknell, Secretary

(467-1)

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