REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on March 18, 1996, 8:30 a.m., in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the amended application of Union Pacific Resources Company for an order to establish 320-acre drilling and spacing units for production of gas and associated hydrocarbons from the Morrow V-3 Sandstone and all stratigraphically shallower Morrow sa ndstones for the below-described lands located in portions of Harker Ranch Field in Kit Carson and Cheyenne Counties.

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-referenced matter.

2. Due notice of the time, place and purpose of the hearing has been given in all respects as required by law.

3. That 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. That evidence presented at the administrative hearing indicates that the Morrow V-3 Sandstone identified as the stratigraphic equivalent of the interval between 5,221 feet and 5,264 feet as shown on the Compensated Neutron Density log for the UPRC Harker 12-35 No. 4 Well located in the SW1/4 NW1/4 of Section 35, Township 12 South, Range 43 West, 6th P.M., Cheyenne County, constitutes a common source of supply of gas and associated hydrocarbons underlyi ng the following described lands in Kit Carson and Cheyenne Counties, Colorado, to-wit:

Township 11 South, Range 43 West, 6th P.M. Sections 35 - 36: All

Kit Carson County

Township 12 South, Range 43 West, 6th P.M. Sections 1 - 3: All Sections 10 - 16: All Sections 21 - 28: All Sections 33 - 36: All

Township 1-3 South, Range 42 West, 6th P.M. Sections 14 - 16: All Sections 19 - 23: All Sections 26 - 27: All Section 28: N1/2, N1/2 S1/2 Section 29: All Section 30: NE1/4, E1/2 NW1/4, E1/2 SE1/4 Sections 34 - 35: All

Township 13 South, Range 43 West, 6th P.M. Sections 1 - 3: All Sections 10 - 15: All Section 22: All Section 23: W1/2 Section 24: E1/2

Cheyenne County

5. That for purposes of this order, a gas well should be defined as a well which produces gas with a gas/oil ratio equal to or In excess of 10,000 standard cubic feet per stock tank barrel of oil.

6. That the surface and bottomhole location or completion interval for each permitted well should be located no less than 1,000 feet from the boundary of the drilling unit, irrespective of lease lines, and no less than 2,640 feet from the nearest well permitted to, drilling to, completed in or producing from the Morrow V-3 Sandstone and all stratigraphically shallower Morrow sandstones.

7. That in order to prevent the waste of oil and gas, as defined by law; to protect the 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 Morrow V-3 Sandstone and all stratigraphically shallower Morrow sandstones, a common source of supply underlying the lands defined herein; that said unit should consist of the N1/2- and, the S1/2 or the W1/2 and the E1/2 of the governmental section.

8. That the available geological and engineering data concerning said Morrow V-3 Sandstone indicates that one well will effciently and econimically drain an area of approximately 320-acres, and that drilling units of the size and shape hereinabove described are not smaller than the maximum area that can be efficiently drained by one well producing from said Morrow V-3 Sandstone and all stratigraphically shallower Morrow sandstones.

9. That the Director should be granted authority to approve requests for exception locations due to topographic conditions, archeological conditions, irregular sections, surface use conflicts, or reservoir considerations provided the Operator obtain a waiver or consent signed by the lease owner toward whom the well is proposed to be moved, agreeing to the proposed location.

10. That the below-listed wells previously dolled to the Morrow Formation should be should be approved as exceptions to the permitted well location:

Well Name Well Location

Anschutz East Big Timber #11-1 2,2W FSL & 2,400' FWL, Sec. 1-12S-43W, Cheyenne Co. UPRC Steele 44C-3 #1 465' FSL & 600' FEL, Sec 3-13S-43W, Cheyenne Co. UPRC Helen 41-34 #1 1,265' FNL & 460' FEL, Sec 34-12S-43W, Cheyenne Co. UPRC Donald 41-10 #2 420' FNL & 420' FEL, Sec 10-13S-43W, Cheyenne Co. UPRC Eiger 14-11 #1 316' FSL & 604 ' FWL, Sec 11-12S-43W, Cheyenne Co. UPRC Harker Ranch 14-1 #1 460' FSL & 1,326- FWL, Sec 1-13S-43W, Cheyenne Co. UPRC Weed 22-27 #2 1,920' FNL & 1,920' FWL, Sec 27-12S-43W, Cheyenne Co. UPRC Frank 41-29 #1 600' FNL & 720' FWL, Sec 29-13S-42W, Cheyenne Co. UPRC Harker 12-35 #4 2,060- FNL & 1,320- FWL, Sec. 35-12S-43W, Cheyenne Co. UPRC Share 24-21 #1 720- FSL & 2,040- FWL, Sec 21-13S-42W, Cheyenne Co. UPRC Norrene 13-2 #1 1,780' FSL & 460' FWL, Sec 2-13S-43W, Cheyenne Co. UPRC Roth 12-27 #2 2,180' FNL & 1,320' FWL, Sec 27-13S-42W, Cheyenne Co. UPRC Weco-TXO-Roth 41-27 #1 460' FNL & 1,320' FEL, Sec 27-13S-42W, Cheyenne Co. UPRC Bill 21-26 #3 1,320' FNL & 1,780' FWL, Sec 26-13S-42W, Cheyenne Co.

11. Letters in support of the application were filed by Wiepking-Fullerton Energy, L.L.C. and Mull Drilling Company, Inc.

12. In order to monitor the gas/oil ratio of all wells producing in the application area, each operator should report a gas/oil ratio to the Commission every six (6) months for all wells producing from any interval in the Morrow Formation.

13. Based on the facts stated in the application, having received no protests, and having been heard by the Hearing Officer who recommends approval of the application, the Commission should approve the request and establish 320-acre drilling and spacing units for production of gas and associated hydrocarbons from the Morrow V-3 Sandstone and all stratigraphically shallower Morrow sandstones for the above-described lands.

ORDER

NOW, THEREFORE, IT IS ORDERED, that 320-acre drilling and spacing units are hereby established for production of gas and associated hydrocarbons from the Morrow V-3 Sandstone identified as the stratigraphic equivalent of the interval between 5,221 feet and 5,264 feet as shown on the Compensated Neutron Density log for the UPRC Harker 12-35 No. 4 Well located in the SW1/4 NW1/4 of Section 35, Township 12 South, Range 43 West, 6th P.M., Cheyenne County, or stratigraphically shallower Morrow sandstones underlying the below-described lands and the permitted well shall be located no closer than 1,000 feet from the boundaries of the drilling and spacing unit, and no closer than 2,640 feet to the nearest well permitted to, drilling to, completed in or producing from the Morrow V-3 Sandstone or stratigraphically shallower Morrow sandstones:

Township 11 South, Range 43 West, 6th P.M. Sections 35 - 36: All

Kit Carson County

Township 12 South, Range 43 West, 6th P.M. Sections 1 - 3: All Sections 10 - 16: All Sections 21 - 28: All Sections 33 - 36: All

Township 1-3 South, Range 42 West, 6th P.M. Sections 14 - 16: All Sections 19 - 23: All Sections 26 - 27: All Section 28: N1/2, N1/2 S1/2 Section 29: All Section 30: NE1/4, E1/2 NW1/4, E1/2 SE1/4 Sections 34 - 35: All

Township 13 South, Range 43 West, 6th P.M. Sections 1 - 3: All Sections 10 - 15: All Section 22: All Section 23: W1/2 Section 24: E1/2

Cheyenne County

IT IS FURTHER ORDERED, that the Director shall be granted authority to approve requests for exception locations due to topographic conditions, archeological conditions, irregular sections, surface use conflicts, or reservoir considerations provided the Operator obtain a waiver or consent signed by the lease owner toward whom the well is to be moved, agreeing to the proposed location. If any owner of the proposed well is also the majority owner of the le asehold interest covering a spacing unit toward which the well is proposed to be moved, then a waiver or consent shall be obtained from the mineral interest owner subject to such lease.

IT IS FURTHER ORDERED, that the-below-listed wells previously drilled to the Morrow Formation shall be approved as exceptions to the permitted well location:

Well Name Well Location

Anschutz East Big Timber #11-1 2,2W FSL & 2,400' FWL, Sec. 1-12S-43W, Cheyenne Co. UPRC Steele 44C-3 #1 465' FSL & 600' FEL, Sec 3-13S-43W, Cheyenne Co. UPRC Helen 41-34 #1 1,265' FNL & 460' FEL, Sec 34-12S-43W, Cheyenne Co. UPRC Donald 41-10 #2 420' FNL & 420' FEL, Sec 10-13S-43W, Cheyenne Co. UPRC Eiger 14-11 #1 316' FSL & 604 ' FWL, Sec 11-12S-43W, Cheyenne Co.

Well Name Well Location

UPRC Harker Ranch 14-1 #1 46T FSL & 1.326' FWL, Sec 1-13S-43W, Cheyenne Co. UPRC Weed 22-27 #2 1,920- FNL & 1.920- FWL, Sac 27-12S-43W, Cheyenne Co. UPRC Frank 41-29 #1 600' FNL & 720' FWL, Sec 29-13S-42W, Cheyenne Co. UPRC Harker 12-35 #4 2,060- FNL & 1,320' FWL, Sec. 35-12S-43W, Cheyenne Co. UPRC Share 24-21 #1 720' FSL & 2,040' FWL, Sec 21-13S-42W, Cheyenne Co. UPRC Norrene 13-2 #1 1,780' FSL & 460- FWL, Sec 2-13S-43W, Cheyenne Co. UPRC Roth 12-27 #2 2,180' FNL & 1,320' FWL, Sec 27-13S-42W, Cheyenne Co. UPRC Weco-TXO-Roth 41-27 #1 460- FNL & 1,320- FEL, Sec 27-13S-42W, Cheyenne Co. UPRC Bill 21-26 #3 1,320- FNL & 1,780' FWL, Sec 26-13S-42W, Cheyenne Co.

IT IS FURTHER ORDERED, that in order to monitor the gas/oil ratio of all wells producing in the application area, each operator shall report a gas/oil ratio to the Commission every six (6) months for all wells producing from any interval in the Morrow Formation.

IT IS FURTHER ORDERED, that the rules and regulations contained herein 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, rules and regulations.

ORDERED this 10th day of April, 1996, as of March 18, 1996

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary

Dated at Suite 801 1120 Lincoln Street Denver, Colorado 80203 April 10, 1996