REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on July 18, 1994, in Room 610, State Services Building, 1525 Sherman Street, Denver, Colorado, after giving Notice of Hearing, as required by law on the application of Duncan Energy Company, for an order to amend Cause No. 471 to allow a well to be drilled at an exception location 400 feet FNL and 600 feet FEL in the NE1/4 NE1/4 of Section 5, Township 18 South, Range 41 West, 6th P.M., for the 80-acre drilling and spacing unit consisting of the N1/2 of Section 5, for production from the Morrow Sandstone Formation.

FINDINGS

The Commission finds as follows:

1. Duncan Energy Company as applicant herein, are interested parties 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. In Order No. 471-1 issued August 21, 1989, the Commission established 80-acre drilling and spacing units for the production of oil and associated hydrocarbons from the Morrow Sandstone Formation, including Section 5, Township 18 South, Range 41 West, 6th P.M. Said units consist of the E1/2 and the W1/2 or the N1/2 and the S1/2 of a governmental quarter section, with the permitted well to be located no closer than 600 feet from the boundaries of the unit and no closer than 1200 feet from any other producible or drilling well when producing from or drilling into the Morrow Sandstone Formation. Said Section 5 was included in Area "A" which consists of lands which are irregular in shape and do not contain 640-acres per section. In Area "A" the units are to consist of 80-acre tracts approximately 1800 feet in width and such length as necessary to constitute an attribution of 80 continuous acres and sho uld be rectangular or square in shape.

5. This matter was heard by the Hearing Officer who recommends approval based upon the seismic and geologic testimony presented at the administrative hearing which indicates that an exception to the permitted well location is necessary in order to encounter hydrocarbons in the Morrow Sandstone Formation.

6. At the time of the hearing, the Commission requested that the Applicant provide the seismic sections to the Hearing Officer for review of the interpretation of the seismic data.

7. No objections to the application were received and an order of the Commission should be entered after review of the seismic interpretation by the Hearing Officer, allowing the Barnes No. 21-5 Well to be drilled at an exception location 400 feet FNL and 600 feet FEL in the NE1/4 NE1/4 of Section 5, Township 18 South, Range 41 West, 6th P.M., for the 80-acre drilling and spacing unit consisting of the N1/2 of Section 5, for production from the Morrow S andstone Formation.

ORDER

NOW, THEREFORE, IT IS ORDERED, that Order No. 471-1 shall be amended to allow the Barnes No. 21-5 Well to be drilled at an exception location 400 feet FNL and 600 feet FEL in the NE1/4 NE1/4 of Section 5, Township 18 South, Range 41 West, 6th P.M., for the 80-acre drilling and spacing unit consisting of the N1/2, for production from the Morrow Sandstone Formation.

IT IS FURTHER ORDERED, that should a commercial well be completed at the location set forth above, the Commission shall, upon application of any interested person, take such action as will offset any advantage which the person securing the exception may have over other procedures by reason of the drilling of the well as an exception location.

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 July 18, 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 August 15, 1994 ??

(471#5)