REPORT OF THE COMMISSION

This matter came on for hearing before the Commission on July 17, 1989 at 8:30 a.m. in Room 101, State Education Building, 201 East Colfax Avenue, Denver, Colorado, on the verified application of Union Pacific Resources Company for approval of a certain Unit Agreement and Unit Operating Agreement within the proposed Bledsoe Ranch Unit Area.

FINDINGS

The Commission finds as follows:

1. Union Pacific Resources Company as applicant herein, is an interested party in the subject matter of the above-entitled 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. The following lands are included in the application:

Township 12 South, Range 50 West, 6th P.M. Section 30: SW/4 Section 31: W/2 NE/4, NW14 SW/4, NW/4

Township 12 South, Range 51 West, 6th P.M. Section 25: E/2 SE/4 Section 36: All

Township 13 South, Range 51 West, 6th P.M. Section 1: All Section 11: N/2, SW/4 Section 2: E/2 SE/4 Section 12: NW/4 Section 10: E/2 NE/4, W/2 NE/4, SE/4 NW/4, NE/4 SW/4, SE/4

containing 3040 acres, more or less, and providing for involuntary unit operation and development including the injection of fluids into the Morrow "B" reservoir underlying the proposed Bledsoe Ranch Unit Area.

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5. On May 15, 1989, Order No. 468-1 was entered by the Commission authorizing Union Pacific Resources Company to continue a gas injectivity test in the Morrow Sand at the well Grays State #5 24-36 located in the SE/4 SW/4 Section 36, Township 12 South, Range 51 West, 6th P.M. until the July 17, 1989 hearing of the Commission.

6. On July 6, 1989, a protest to the above application was filed by the Bledsoe Ranch by William E. Bledsoe III requesting that the southeast quarter of said Section 10 be excluded from the unit.

7. On July 13, 1989, Murfin Drilling Company filed a statement supporting the proposed unit excluding E/2 SE/4 of said Section 2, the NE/4 of said Section 11 indicating such lands may be in a separate reservoir referred to as the Castle Peak Pool.

8. At the time of hearing, Union Pacific Resources Company amended the application to exclude the E/2 SE/4 of Section 2, the N/2 and SW/4 of Section 11, and all parts of Section 10, Township 13 South, Range 51 West, 6th P.M.

9. At the time of hearing, Samedan Oil Corporation filed a statement protesting the exclusion of the E/2 SE/4 of said Section 2.

10. At the time of hearing, Petrogulf Corporation filed a statement protesting the exclusion of the E/2 SE/4 of said Section 2.

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11. At the time of hearing, Wolverine Exploration Company filed a request that the Commission continue the matter and defer its decision until a well could be drilled by Wolverine in the NE/4 NE/4 of said Section 11, and that if such well was successful it would be established that the lands in Section 2, 10 and 11 should be included in the Bledsoe Ranch Unit.

12. The provisions contained in said Unit Agreement and Unit Operating Agreement have been reviewed by the Commission staff and found to be just and reasonable as required by 34-60-114(4) C.R.S. 1973, as amended, and further that the requirements of Rules No. 326 and 401 have been met.

13. By testimony taken and exhibits presented, the terms and conditions provided by the Unit Agreement and Unit Operating Agreement meet the requirements of the statute and are just and reasonable to all interest contained within said amended unit area. The plan for unit operations as presented by the Applicant providing for the conduct of operations to recover oil and gas is necessary to increase the ultimate recovery and the value of the estimated additional recovery of oil and gas exceeds the estimated additional cost incident to conducting such operations.

14. The plan for unit operations has been approved by those persons required to pay at least eighty percent of the costs of the unit, and by the owners of at least eighty percent of the production proceeds.

15. The Commission should continue the matter until the regularly scheduled hearing on August 21, 1989 and that, after agreement by all interested parties, a decision would be rendered by Commissioners Welborn, Johnson and Anderson. All parties waived further requirements of notice. All mineral interests in the lands proposed to be excluded should be given notice of the continuation of hearing and the opportunity to file a protest.

16. That all interested parties, including mineral interests in the original requested area, should file a formal protest as required by Rule 508 if they so chose, and be prepared to present testimony at the August 21, 1989 hearing.

17. That the gas injectivity test be allowed to continue at the well Grays State #5 24-36 as ordered by Order No. 468-1 until the August 21, 1989 hearing.

O R D E R

NOW, THEREFORE, IT IS ORDERED, that the above-entitled matter be continued until the Oil and Gas Conservation Commission hearing on August 21, 1989, at which hearing Commissioners Welborn, Johnson and

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Anderson will render a decision.

IT IS FURTHER ORDERED, that all interested parties including mineral interest owners in the original requested area file a formal protest as required by Rule 508 if they so chose and be prepared to present testimony at the August 21, 1989 hearing.

IT IS FURTHER ORDERED, that the gas injectivity test be allowed to continue at the well Grays State #5 24-36 as ordered by Order No. 468-1 until the August 21, 1989 hearing.

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith as all parties agreed to be bound by the oral orders of the Commission.

IT IF 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 day of ,

1989, as of July 17, 1989.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Dennis R. Bicknell, Secretary - 4 -(468-2)