REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on January 23, 1991, at 8:30 a.m., in Room 101, State Education Building, 201 East Colfax, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified application of Anschutz Corporation, for an order to establish 80-acre drilling and spacing units for the production of oil and associated hydrocarbons from the Morrow Sandstone formation underlying certain lands in Cheyenne County, Colorado.

FINDINGS

The Commission finds as follows:

1. Anschutz Corporation, 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. 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 the Hearing Officer has heard the application at an administrative hearing, that no protests to the application have been filed, and the Hearing Officer has recommended the application be approved.

5. 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 ensure proper and efficient development and promote conservation of the oil and gas resources of the State, an order should be made establishing 80-acre drilling and spacing units for the production of oil and associated hydrocarbons from the Morrow formation, a common source of supply, underlying the lands herein described with the units to consist of the N/2 and S/2 or the E/2 and W/2 of each governmental quarter section, to be designated as such by the operator of the first well in the quarter section, with the permitted well to be located in the SW/4 and the NE/4 of each quarter section and no closer than 400 feet from the boundaries of said unit. Further, applications for wells to be drilled at exception locations should be approved administratively by the Director, provided that waivers from offset lease owners or mineral interest owners are submitted.

Township 12 South, Range 51 West, 6th P.M. Sections 1 through 3: All Sections 10 through 15: All

6. All available geologic and engineering data concerning said Morrow formation indicates that one well will economically and efficiently drain an area of approximately 80-acres, and that drilling units the size and shape hereinabove described are no smaller than the maximum area that can be efficiently drained by one well producing from said Morrow.

7. The Bledsoe No. 13-12 Well located in the SW/4 SW/4 of Section 12, Township 12 South, Range 51 West, 6th P.M. within the above-described area should be designated as the permitted well for the S/2 of the SW/4 of said Section 12.

8. The Director, without additional notice or hearing, should be empowered to grant exceptions to well locations provided that the owners proposing to drill a well file with the Commission waivers signed by the lease owners toward whom the well location is proposed to be moved or if the owner of the proposed well is also the owner of the lease on the property toward which the well is proposed to be moved, waivers are signed by the mineral interest owners of the lands covered by the offset lease.

O R D E R

NOW, THEREFORE IT IS ORDERED, that the following rules and regulations shall apply hereafter to a well drilled, completed, or recompleted in the Morrow formation underlying the Speaker Field herein described, in addition to any other rules and regulations and orders of the Commission, if any, heretofore adopted and not in conflict herewith.

Rule 1. Eighty (80) acres, more or less, drilling and spacing units shall be and the same are hereby established for the production of oil and associated hydrocarbons from the Morrow formation underlying the following described lands in the Speaker Field, Cheyenne County, Colorado, to-wit:

Township 12 South, Range 51 West, 6th P.M. Sections 1 through 3: All Sections 10 through 15: All

Rule 2. Said drilling units shall consist of 80-acres more or less, and shall consist of the N/2 and S/2 or the E/2 and W/2 of a governmental quarter section, to be designated as such by the operator of the first well in the quarter section, with the permitted well to be located in the SW/4 and the NE/4 of each quarter section and no closer than 400 feet from the boundaries of the unit.

Rule 3. The Director, without additional notice or hearing should be empowered to grant exceptions to well locations provided that the owners proposing to drill a well, file with the Commission a waiver or consent signed by the lease owner toward whom the well location is proposed to be moved or provided that if the owner of the proposed well is also the owner of the lease on the property toward which the well is proposed to be moved, a waiver shall be obtained from the mineral interest owner of the lands covered by the offset lease.

Rule 4. The Bledsoe No. 13-12 Well located in the SW/4 SW/4 of Section 12, Township 12 South, Range 51 West, 6th P.M. within the above-described area is hereby designated as the permitted well for the S/2 of the SW/4 of said Section 12.

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 the above orders.

Entered this day of , 1991 as of January 23, 1991.

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 February 6, 1991 0930I